Question 1
One CEO buys a fleet of private jets for the company. Another CEO uses company funds to host a birthday for his wife in Sardinia. These are examples of
◦ free cash flow problem.
◦ asymmetric information problem.
◦ ownership separation problem.
◦ principal-agent problem.
Question 2
The process by which ownership of a firm passes from the equity holders to the debtholders is
◦ bankruptcy.
◦ going private.
◦ leveraged buyout.
◦ recapitalization.