Which of the following is not an example of a Principal/Agent relationship?

A. Student/Professor.

B. Debt Holder/Equity Holder.

C. Equity Holder/Management.

D. Management/Debt Holder.

The amount of debt that a firm can take on is affected by

A. the Principal/Agent relationship between debt and equity investors.

B. covenants in the debt instruments.

C. market risk.

D. all of the above.

The tax deductibility of interest results in a higher cost of capital for the firm. True/False