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Lincoln Corporation has accumulated a large amount of cash flow. The CEO proposes to fly all managers to a luxury resort in Hawaii at the
Lincoln Corporation has accumulated a large amount of cash flow. The CEO proposes to fly all managers to a luxury resort in Hawaii at the end of the year for a one-week holiday using the corporate jet. Describe how the companys capital structure could be changed to prevent managers from spending the companys cash on the luxury holiday, but instead investing the cash in positive NPV projects. Explain why the proposed change to capital structure could help encourage investment in positive NPV projects.
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