Agency costs refer to the internal costs associated with managers and directors who act on behalf of the shareholders but may have differing goals and incentives. These costs may include monitoring costs, bonding costs, and residual loss costs. Therefore, choice D is the best answer. The other options do not accurately reflect the concept of agency costs.

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Agency Costs Are

Question 196

Multiple Choice

Agency costs are:

A) the costs of hiring managers
B) assets minus liabilities
C) common stock price times number of shares outstanding
D) internal costs associated with managers and directors

Correct Answer: