Reference no: EM132659561

1. Value maximisation and agency relationship

2. Retirement planning

Question a: In the first lecture we discussed value maximisation as the main goal of the corporation. We also introduced the agency relationship. Now consider an important corporate event called takeover. According to Investopedia, takeover occurs when one company makes a bid to assume control of or acquire another, often by purchasing a majority stake in the target firm. In the takeover process, the company making the bid is the acquirer while the company it wishes to take control of is called the target. Empirically it is estimated that on average shareholders from target company enjoy an average gain when acquired while the shareholders of the bidder are quite likely going to loose as their average gains from merger are negative. Why it is so? Try to provide several reasons and try to connect it also to the agency relationship we discussed in the very first lecture.

Question b: Peter would like to retire in 30 years from now. So far he has accumulated 120 000 euros but would like to have at least 2 million euros by the time he is going to retire. What should be additional annual investments Peter has to make in order to accumulate the necessary saving for retirement? Now assuming that Peter has a life expectancy of 20 years after the retirement, what is going to be his monthly pension? You may assume (for simplicity) 6% nominal annual yield throughout all years.