Agency problems in capital budgeting include-reduced efforts, perks, empire building and entrenching investments.

Question

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Agency problems arise when managers prioritize their personal interests over those of the shareholders, which leads to reduced efforts, excessive perks, investments that entrench the manager, and empire building. These problems can affect capital budgeting decisions as managers may select projects that benefit them rather than ones that maximize value for the shareholders.

Agency Problems in Capital Budgeting Include-Reduced Efforts, Perks, Empire Building