Which one of the following statements is TRUE?
A. An agency cost is the reduction in firm value due to agency conflicts.
B. An agency cost is the wage required to pay someone who is hired to perform a service.
C. An example of an agency cost is when the board of directors pays a dividend to shareholders.
D. An example of an agency cost is when an attorney hires an expert witness for a trial.
E. The commission required by the Federal Housing Agency for a small business loan is an example of an agency cost.
Answer: A
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