The cost of debt financing results from ________.
A) the decreased probability of bankruptcy caused by debt obligations
B) the risk-return trade-off associated with ownership of a firm
C) the costs associated with lenders having less information about a firm's prospects than investors and managers
D) the agency costs of the lenders' monitoring and controlling a firm's actions

Question

Quizplus · Accepted Answer

The cost of debt financing includes agency costs, which arise from the need for lenders to monitor and control a firm's actions to ensure that the firm meets its debt obligations.

The Cost of Debt Financing Results from ________