Reference no: EM131343536
MINI CASE
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.
|
Investors expect the market rate of return this year
: Investors expect the market rate of return this year to be 12%. A stock with a beta of 1.2 has an expected rate of return of 14%. If the market return this year turns out to be 8%, what is the rate of return on the stock
|
|
Degree of operating leverage at financial break-even level
: A project has the following estimated data: price = $100 per unit; variable costs = $51 per unit; fixed costs = $6,200; required return = 8 percent; initial investment = $7,000; life = five years. Ignore the effect of taxes. What is the accounting br..
|
|
What is the cost of equity and pretax cost of debt
: Clifford, Inc., has a target debt–equity ratio of .85. Its WACC is 8.4 percent, and the tax rate is 35 percent. If the company’s cost of equity is 12.5 percent, what is its pretax cost of debt? If the aftertax cost of debt is 5.1 percent, what is the..
|
|
Detailed analysis of pyalongs industry
: MPM735/935 - International Business Management - Detailed analysis of Pyalong's industry or the potential market for Pyalong's products - Accurate, timely and relevant information leading to opinion on whether Pyalong should seriously consider market..
|
|
List provisions in corporate charter that affect takeovers
: What characteristics of the board of directors usually lead to effective corporate governance? List three provisions in the corporate charter that affect takeovers.
|
|
Why do you think no relationship was found
: The results showed that there was no relationship between age and comprehension scores; all age groups had equally low comprehension scores. Why do you think no relationship was found? Identify at least two possible reasons.
|
|
What does that mean to viability of medicare and medicaid
: How can the recipients of these programs be categorized into different risk pools? Explain. What does that mean to the viability of Medicare and Medicaid? Would the US be able to transit to the British style of national healthcare? Why or why not
|
|
How do the dosages on the bottle compare to the dosages
: How do the dosages on the bottle compare to the dosages recommended from Mosby's Handbook and other reputable references found?How many supplements would you have to take daily in order to get therapeutic recommended dosages? Were the herbs in stan..
|
|
Describe the value of a debriefing following the study
: If you were investigating variables that affect helping behavior, would you be more likely to use a straightforward or staged manipulation? Why?
|