The agency problem refers to the possible conflicts of interest between:. a. self-interested managers as principals and shareholders of the firm who are the agents.
b. altruistic managers as agents and shareholders of the firm who are the principals.
c. self-interested managers as agents and shareholders of the firm who are the principals.
d. dutiful managers as principals and shareholders of the firm who are the agents.

The agency problem is the conflict that can arise between self-interested managers as agents and shareholders of the firm who are the principals.

Agency conflict occur when the shareholders of a firm do not manage the company. Instead, managers are hired to manage the firm. Sometimes, the interest of shareholders and managers are not aligned.

For example, if the remuneration managers receive is tied to the net income of the firm. The manager can undertake projects that would boost net income but not be in the best interest of shareholders.

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c. self-interested managers as agents and shareholders of the firm who are the principals.

Explanation:

The Agency Problem in Corporate Finance refers to a situation where the Managers who are supposed to be agents to increase the wealth of the Shareholders who are the principles realise and decide to act in their own interest and increase their wealth instead.

It is an age old problem that rears its head up in almost every relationship where a party is to act in the best interest of another. They might simply ask themselves, why not act in our own best interests.

For example, Managers might award contracts to companies that promise to give them some form of compensation for the contract instead of companies that would have done the job in question at cheaper rates and with more efficiency and thus brought more Profitability to the firm.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.