Which of the following is not an example of an agency cost?
A) a lavish dinner or trip.
B) a missed investment opportunity.
C) a cost that results from a conflict of interest between the agent and the principal.
D) the cost of a new piece of equipment.

Question

Quizplus · Accepted Answer

The cost of a new piece of equipment is not an example of an agency cost because it is a necessary expense that benefits both the agent and principal. An agency cost arises when an agent acts in their own interest, rather than the principal's interest, which results in a cost to the principal. The other options (A, B, and C) are all examples of agency costs.

Which of the Following Is Not an Example of an Agency