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The following statement appears in "Agency Costs and Unregulated Banks: Could Depositors Protect Themselves?" by Catherine England (Cato Journal 7, no, 3 [Winter 1988]):
The agency costs literature argues that both agents and principals are aware of the potential conflicts of interest and abuses that can arise in an agency relationship. But neither group is expected to passively accept the limitations imposed by the potential problems and inefficiencies. The recognition of agency costs creates incentives for both groups to take steps to minimize and control the problem. To protect their interests, principals have reason to develop and incorporate contractual terms designed to channel the behavior of agents in desirable directions and/or to limit their ability to engage in unacceptable activities. In addition, principals setting a value on agents' services will consider the costs associated with the principal/agent relationship and reduce accordingly the compensation that would be paid to agents in a world of perfect information. Faced with the possibility of reduced compensation, agents will not only agree to contractual terms that reassure principals, but will also develop mechanisms that tend to make principals more confident.
a. What are agency costs?
b. What can principals do to reduce agency costs?
The purpose of the project is to use the S&P 500 indexfutures contract to hedge portfolio risk and subsequently evaluate the hedgeperformance.
Explain the idea of value-based management and how shareholder value relates to the interaction between product and capital markets
2. Lindsey Insurance Co. has current sales of $10 million and predicts next year's sales will grow to $14 million. Current assets are $3 million and fixed assets are $4 million. The firm's net profit margin is 7 percent after taxes.
npv versus irr. framing hanley llc has identified the following two mutually exclusive projectsyear nbsp cash flow
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Suppose that you are setting up your retirement plan by planning two investment plans together. You want to earn a total of $1,000,000 after 30 years from two investment plans.
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barry company is considering a project that has the following cash flow and wacc data. what is the projects npv? note
What does each ratio in the category attempt to measure? How is each calculated? What does each measure? What is the general rule of thumb associated is ratio?
John purchased three new front loaders on January 15, 2014 for $550,000 and elects section 179 expensing on the front loaders. He also purchased a dump truck on January 18, 2014 for $80,000. He elects to take additional first year depreciation on ..
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