Which of the following actions do not lead to agency costs and explain why?

I. Foregoing an investment opportunity which would add to the market value of the owners equity.

II. Paying a dividend to each of the existing shareholders.

III. Purchasing new equipment which increases the value of each share of stock.

IV. Hiring outside auditors to verify the accuracy of the company financial statements

Which form of business organization(s) can potentially face agency problems and which faces the greatest agency problems? Please consider each of the following business organizations and explain why they may or may not face agency problem.

I. Sole proprietorship

II. Partnership

III. Corporation