QUESTION 7 Which one of the following statements is TRUE? a. When lenders protect themselves from the risk of asset switching the firm's WACC can decrease. b. Lenders can't legally prevent a firm from engaging in asset switching. When an owner/manager sells stock to an outsider, that outsider now bears some of the costs of the owner/manager's perquisite consumption d. A lender calling in a corporate loan and then lending the funds out to a safer borrower is an example of asset switching. e. Firms borrowing money have greater flexibility to use that money when there are debt covenants. OC QUESTION 8 Which one of the following statements is TRUE? An example of an agency relationship is when a supervisor hires a forklift operator. a. b. An agency relationship is when a principal works for an agent. c. An example of an agency relationship is when the CEO nominates a slate of candidates to be on the board of directors. d. An agency relationship is when a principal hires an agent to perform a service and gives them decision-making authority. e. In an agency relationship, the agent delegates authority to the principal. QUESTION 9 Which one of the following statements is TRUE? a. A classified board is one in which the board members serve anonymously. b. A company whose board members are elected in staggered terms is said to have an interlocking board of directors. c. A shareholder rights provision discourages takeovers because the acquiring company will suffer dilution. d. Shareholders want to prevent takeovers because they don't want the company purchased out from under them. e. A company has an interlocking board of directors if the CEO also serves as the chairman of the board of directors