A manager may prefer less than the optimal level of debt,because:

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A manager may prefer less than the optimal level of debt because additional debt increases the risk of bankruptcy and limits a manager's discretion. While debt can offer tax benefits and lower the cost of borrowing, too much debt can be detrimental to a company's financial health. A manager may also want to maintain some level of control over decision making and not be overly influenced by equity holders. Therefore, the best choice is C, which highlights the potential negative effects of too much debt.

A Manager May Prefer Less Than the Optimal Level of Debt,because