QUESTION 7 Which of the following statements regarding agency problems and costs are correct? 1. An agency problem exists when there is a conflict of interest between the stockholders and the management of a firm II. An agency problem exists when there is a conflict of interest between a principal and an agent III. An agency cost occurs when firm management avoids risky projects that would favorably affect the stock price because the managers are worried about keeping their jobs. IV. An agency cost occurs when management chooses an action that benefits the shareholders but reduces management compensation I and II only Il and Ill only I, III, and IV only I, II, and Ill only II, III, and IV only The cash flow of a firm, also referred to as cash flow from assets, must be equal to the cash flow to: debt holders minus the cash flow to equity holders. equity holders plus the cash flow to debt holders. the government plus the cash flow to equity holders. equity holders minus the cash flow to debt holders. the government, the debt holders, and the equity holders. OO000