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Contracting Cost - Agency Costs
These are costs acquired in devising the contract between the shareholders and managers.
The contract is drawn to ensure management act in the excellent interest of shareholders and the shareholders conversely undertake to compensate the management with their effort.
Examples of the costs are as:
The business plan for a new company that has obtained a 5 year lease for operating a local bus service is shown below. Items marked with an asterisk represent continuous cash flow
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