What type of agency costs might occur

Assignment Help Corporate Finance
Reference no: EM131523606

Finance Assignment

Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions.

a. What is an agency relationship? When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency conflicts exist? Explain your answer

b. If you expanded and hired additional people to help you, might that give rise to agency problems?

c. Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?

d. Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate the agency costs?

e. Suppose your company is very successful and you cash out most of your stock and turn the company over to an elected board of directors. Neither you nor any other stockholders own a controlling interest (this is the situation at most public companies). List six potential managerial behaviors that can harm a firm's value.

f. What is corporate governance? List five corporate governance provisions that are internal to a firm and are under its control.

g. What characteristics of the board of directors usually lead to effective corporate governance?

h. List three provisions in the corporate charter that affect takeovers.

i. Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation?

j. What is block ownership? How does it affect corporate governance?

k. Briefly explain how regulatory agencies and legal systems affect corporate governance.

Reference no: EM131523606

Previous Q& A

  What objectives must be considered in the broader context

Sometimes broadening the decision context can change the planning horizon. For example, many companies face specific technical problems.

  Jurisdiction under a particular law

Should a court apply the Chevron doctrine and defer to an agency's interpretation of its jurisdiction under a particular law when that interpretation.

  Calculate cost of new stock using dividend growth approach

What is each project's MIRR at a cost of capital of 12 percent? At r 18%? Calculate the cost of new stock using the dividend growth approach.

  Identify basic elements of a real-estate investor decision

Imagine the difficulties of an employer whose decision context is choosing a new employee from a set of applicants whom he will interview.

  Suppose the surgeon general of the us announced

Suppose the Surgeon General of the U.S. announced that it would be a federal offense for people not to brush their teeth at least twice a day.

  Is the statute of frauds an offensive or a defensive weapon

Is the Statute of Frauds an offensive or a defensive weapon?Additionally what kind of contracts does the Statute of Frauds require to be in writing.

  State the research problem or issue in the study

State the research problem or issue in the study. State the hypothesis/questions or objectives. Were they stated clearly

  Handling difficult people-interventions

Review the "Handling Difficult People-Interventions" portion of the week 4 lecture. Based on the techniques outlined there, illustrate how you might handle.

  Calculate the net present value of a business deal

Describe a decision problem that you have faced recently (or with which you are currently struggling). Describe the decision context and your objectives.

  Find an interest rate that gives a net present value of zero

Find the net present value of a project that has cash flows of -$12,000 in Year 1, +$5,000 in Years 2 and 3, -$2,000 in Year 4, and +$6,000 in Years 5 and 6.


Write a Review


Similar Q& A

  Calculated each project payback period

Calculated each project's payback period and came to the correct conclusions, Calculated the NPV for each project and came to the correct conclusions. Calculated the IRR for each project and came to the correct conclusions

  Evaluating the two companies financial statements

A corporation has recently met with auditors to discuss scope of year's audit. Talk about the reason for an integrated audit and give a recent failure of a corporate governance.

  Prepare selling and administrative expense budget by quarter

Fixed expenses are expected to be $40,000 in each quarter. Prepare the selling and administrative expense budget by quarters and in total for 2014.

  Preventing the importation of gray goods legitimately

What does this mean? Is it correct? Why or why not?

  Analyze the past three years of the companys financial data

Analyze the past three years of the company's financial data, which you may obtain from company's financial statement. Determine the company's financial health.

  Are companies being socially responsible

Do executives deserve to make around 200 times as much as the average worker and Is it ethical for managers to take large pay increases while laying off employees and when giving them only small raises?

  When you have selected the fund from the fund screener

Identify each Benchmark you will use to evaluate each fund's performance. When you have selected the fund from the fund screener. Identify which asset (broad and narrow) category the fund matches.

  Explain how company plan to accommodate for decrease in sale

Include how the company plans to accommodate for the decrease in sales and create a budgeting plan for 2014. Also give at least one suggestion for maximizing the budget in response to the equipment purchase.

  Estimate the fair market value of mms equity

Estimate the fair market value of MMs equity as of year-end 2013 and the firm is stable, and the long-term growth rate for all items is expected to be 4%. Their CEO's name is Ray Charles.

  Suppose that the assets of a bank consist of 500 million of

suppose that the assets of a bank consist of 500 million of loans to bbb-rated corporations. the pd for the

  Prepare a profit variance analysis for sell inc

Sell, Inc., is a marketing consulting firm that earns revenues by billing clients for hours worked. Prepare a profit variance analysis for Sell,  Inc.

  An analyst has used the percent of sales to method forecast

an analyst has used the percent of sales to method forecast the items in the table below for 2012-2014 for new energy

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd