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QUESTION TWO. [15 MARKS] a) Evaluate the extent to which borrowing would be seen as effective solution to the corporate agency problem. Would there be

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QUESTION TWO. [15 MARKS] a) Evaluate the extent to which borrowing would be seen as effective solution to the corporate agency problem. Would there be attendant material monitoring costs associated with borrowing as a solution to the agency problem? Fully explain. ( 7 marks) b) Discuss any three major difficulties that corporate managers would face if financial markets were not informationally efficient. ( 8 marks)

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