Which of the following is true? 1. Shareholder activism requires the investors to exercise their voting rights. 2. Agency problem arises if the management does not hold the majority share in the firm (i.e., more than 50%). 3. Stock options and performance plans are examples of external market forces. 4. Agency costs are borne by all the stakeholders, including the shareholders.
Q: Factors affecting forward premiums/discounts - A financial blogger has recently wrote the following…
A: Rate of exchange is quite volatile and depends on the many factors and one factor is the state of…
Q: Columbia Products produced and sold 1,200 units of the company's only product in March. You have…
A: As per Bartleby guidelines,If a question with multiple sub-parts are posted, first 3 sub-parts will…
Q: QUESTION 23 Expenses can be categorized by whether the cost incurred is directly related to…
A: Directly related expenses will have direct or proportional change with the production levels and…
Q: Stephanie requires a return of at least 9% on her stock investments. Pan-Elixir Ltd. is a…
A:
Q: You are allocating your wealth between two shares, Tinkle.com and Circumbendibus Wheels. Tinkle.com…
A:
Q: Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has…
A: Here, To Find: Twelve month spot rate =?
Q: 5. Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is…
A: We have to make the buy versus lease decision. We will find the PV of all the future lease payments…
Q: A farmer purchased 245 acres of land for $4,900/acre. He paid 25% down and obtained a loan for the…
A: Cost of 1 acre land = $4900 Cost of 245 acres land = $4900*245 = $1200500 Down payment = 25% Loan…
Q: Nesmith Corporation's outstanding bonds have a $1,000 par value, a 7% semiannual coupon, 12 years to…
A: Price of a bond is the present value of all its future cash flows. Here the future cash flows will…
Q: a. Calculate the accumulated value of her investment after the first 5 years. $0.00 Round to the…
A: Compounded semi-annually When interest is compounded semi-annually means the interest is added to…
Q: Installation cost, $ million pumping, operating, security cost, $ million per year Replacement of…
A: In financial decision making sometime there are only cost and there are no benefits so we have to…
Q: (1) The total amount of a loan to which interest has been added is P 200,000. The term of the loan…
A: 1) Simple Interest @ 6% Interest = (Principal amount * Interest rate * Time period ) where…
Q: In a certain city, a landlord used to pay one-eighth (12.5%) of profit he made on his rents. Then…
A: A person or a business entity has to pay taxes on one’s earnings and profits. This is the mandate of…
Q: ame an Islamic financing product offered from a bank on paskistan. Explain h
A: Islamic products are based on Islamic financing principal and they are slightly different from…
Q: Hello. all this is a new learning experience for me. the question ask to calculate the price of…
A: The word "share" and "stock" are often used interchangeably Stock is the more generic term, whereas…
Q: On 2022-04-22, Jiefei pays $17,908.48 for a Tbill with a face value of $19,000.00 and a maturity of…
A:
Q: Anu's Amusement Center has collected the following data for operations for the year. Total revenues…
A: Break even point Break even point in terms of number or units is calculated as shown below. Break…
Q: What’s the future value of $100 after 3 years if the appropriate interest rate is 8%, compounded…
A: Information Provided: Principal = $1000 Period = 3 years Interest rate = 8%
Q: Which of the following is an incorrect statement? Revenue - Operating Income = Gross Margin…
A: Gross margin is the amount earned by the firm after deducting COGS from revenue.
Q: An interest-only mortgage is made for $94,000 at 6 percent interest for 10 years. The lender and…
A: A type of loan where the borrower has to pay only interest for a certain period is known as an…
Q: Value = $325,000 Current balance = $245,580 Current payment = $1,890 Taxes = $205 Homeowners…
A: As per the given information: Value = $325,000Current balance = $245,580Current payment =…
Q: c. Courteney-Cox, Inc., is a Texas-based manufacturer and distributor of components and replacement…
A: Solution: Calculation of the minimum certainty equivalent adjustment factor for each project is…
Q: bond's current price is $650. The bond has a face value of $1000, a coupon rate of 5%, maturity in…
A: Yield to maturity is the rate of return realized on the bond when bond is held till maturity and all…
Q: ng the formula for the time value of money, if a sum $15,000 is invested for one year at 10%…
A: Future value money the amount being deposited and the amount of interest being accumulated over the…
Q: 1. talking about web3 what is its Impact on the Financial System. 2 please explain each impact.
A: Web 3.0 is the third generation of internet services, and this will be based on the convergence of…
Q: Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018…
A: as per bartelby guidelines , if question involves multiple sub parts , then 1st 3 sub parts needs…
Q: An investor with a bond of par value $1,000 paying 5% coupon semi-annually will receive ________.…
A: The bond is a debt instrument in which a company receives a loan in the form of the bond price which…
Q: Three years ago, you purchased an year bond issued by Thrumbauer Inc. for At that time the bond had…
A: Given, Purchase price of stock is $43255 Yield on 8 year treasury rate (risk free rate) is 2.65%
Q: Complete the following table given this information: Note: Do not round intermediate calculations.…
A: Solution: Depreciation Expense Method Year 1 Year 2 Straight Line 19,300 19,300…
Q: 4. A certain principal P was invested in a fund at a rate of 14% compounded monthly for the first…
A: Compound interest is the method in which the amount after a period is added back to the investment…
Q: Prepare the depreciation schedule, using the declining-balance method (twice the straight-line…
A: Calculation of rate of depreciation
Q: QUESTION 8 Which of the following about conventional finance and behavioural finance is correct? a.…
A: Conventional finance being traditional finance assumes the investor is a rational one and processes…
Q: the amount to which $500 will grow under each of these conditions: 6% compounded annually for 7…
A: Future value of the amount includes the amount being deposited and amount of compounded interest…
Q: How much market value of each of the zeros will be necessary to fund the plan if you desire an…
A: Information Provided: Annuity amount = $1.4 million per year Interest rate = 8%
Q: John have just purchased a share of Amber Inc. preferred stock. Amber will pay a $10 annual…
A: Solution:- Preferred stock is the stock which has preference over common shares at time of payment…
Q: hares in SergeantPepper will earn a return of 5.80% during a bull market, and 2.40% during a bear…
A: x̅ = ∑ (x*P) y̅ = ∑ (y*P) Covariance = ∑(x - x̅)(y - y̅)] (x) P where x = Return of Sergent Pepper…
Q: Parts A and B Piscataway valves decided to pursue development of a new product line for natural gas…
A:
Q: You are considering investing in a savings bond that will pay $50,000 in 6 years. If the competitive…
A: A Bond refers to a concept that is defined as an instrument that represents the loan being made by…
Q: Wila is a risk-analyst at Deli Bank (DB), a commercial bank with operations in Zambia. DB is…
A: Value at risk is used to measure the amount of potential risk that could occur to an investment…
Q: Two treasury bonds (with semi-annual coupons) are traded. The first bond matures in six months, has…
A: Given: Particulars Amount First bond Dirty price $98.99 6 months Coupon rate 8.00%…
Q: nominal rate, semiannual compounding, discounted back 5 years. Do not round intermediate…
A: Present value if equivalent value of cash money today to be received in the future period based on…
Q: Madsen Motors's bonds have 24 years remaining to maturity. Interest is paid annually, they have a…
A: Current market price of a bond is the PV of its future coupon and par value. The formula to…
Q: Prime rate is conventionally more than 6% above fed funds rate.
A: Answer: This statement is false. Explanation: Prime rate is conventionally more than 6% above fed…
Q: Assuming that the bond with the coupon you computed in b.1 were issued today, show to what the…
A: Coupon rate is 4.86% Time to maturity is 10 years Yield to maturity increased by 1% shortly after…
Q: g the past five years, you owned two stocks that had the following annual rates of return: Year…
A: Arithmetic mean, standard deviation and coefficient of variations are used is in finance to know the…
Q: Sleep Maturity Jamaica offers a 9.5 percent coupon bond with annual payments. The yield to maturity…
A: P0 = Price of the bond C = Annual coupon amount i.e. $95 ($1000 * 0.095) r = Yield to maturity i.e.…
Q: sum of the present values of three payments of P 100,000 each which will occur at the end of 20, 40,…
A: Present value is equivalent value today of the future value of amount based on the interest rate and…
Q: Consider the following information for stocks A, B, and C. The returns on the three stocks are…
A: Capital Asset Pricing Model (CAPM) is used to determine the minimum required rate of return on any…
Q: Ciara has $4,300 in savings. If she deposits the money into a long-term savings account with 2.13%…
A: To Find: Future Value
Q: The NXP fund has an expected return of 4.50%, with volatility 33.00%. The risk free rate is 1.00%,…
A: As per the given information: NXP expected return - 4.50%Volatility or standard deviation of NXP -…
Step by step
Solved in 2 steps
- Which of the following statements is CORRECT? Select one: a. Conflict of interest between shareholders and managers is not possible. b. By definition, the agency problem can only take place in corporations but not in proprietorships and partnerships. c. Conflict of interest between shareholders and bondholders is not possible. d. Managers always work to maximize the long-run value, and therefore the price, of their company stocks. This is exactly what shareholders desire.Which of the following methods would be most likely to decrease the agency problems by helping motivate managers to act in the best interests of shareholders? 1. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. 2. Eliminate a requirement that members of the board of directors have a substantial investment in the firm's stock. 3. Decrease the use of restrictive covenants in bond agreements. 4. Take actions that reduce the possibility of a hostile takeover. 5. Elect a board of directors that allows managers greater freedom of action.Which of the following statements is FALSE? In the shareholder/debtor relationship, the: a. Debtor is the principal, because they have delegated authority to management b. Shareholder and debtor interests are increasingly aligned as the company takes on more debt. c. Interests of the firm’s management tend to be aligned more closely with those of the firm’s shareholders d. Shareholders have an incentive to take on risky projects because they get to keep residual earnings of the firm a. Interests of the firm’s management tend to be aligned more closely with those of the firm’s shareholders b. Shareholders have an incentive to take on risky projects because they get to keep residual earnings of the firm c. Debtor is the principal, because they have delegated authority to management d. Shareholder and debtor interests are increasingly aligned as the company takes on more debt.
- Discuss Mark 10:23-25 and its application to capital rationing and maximizing shareholder wealth. Capital rationing could affect the returns to shareholders. An ethical dilemma is faced by the executives of the business. Capital rationing could affect the stakeholders (other than the shareholder) of the business. Should capital constraints modify the principle of maximizing shareholder wealth?Within the context of financial management, it is important that organizations attempt to align their managers' interests with that of the shareholders. In Chapter 16, Berk and DeMarzo (2020) provide several examples of agency conflict or a conflict between the owners and the management of a firm. Examples of these are: (a) at times managers will take on less (greater) risk than they would if they were the owners of the firm and (b) due to the separation of ownership and control managers are able to entrench themselves within firms and have little risk of being replaced. Provide a few examples of mechanisms that organizations could use to align the interests of both the owners of the firm and its managers.A well-run company should align the management’s interest and with the owner’s interests. What are some actions that stockholders can take to ensure that management’s and stockholders’ interests are aligned? Is this important? What are some of the risks/consequences if the management’s interests are not aligned with the owners?
- Suppose you need additional capital to expand,and you sell some stock to outside investors. If youmaintain enough stock to control the company,what type of agency conflict might occur?11. A corporation may incur agency costs because: A. Managers may not attempt to maximize the value of the firm to shareholders.B. Shareholders incur monitoring costs.C. All of the responses are correct.D. Of the separation of ownership and management. 12. A firm's investment decision is also called its A. liquidity decision.B. financing decision.C. leasing decision.D. capital budgeting decision. 13. A corporation, potentially, has infinite life because it A. has the same ownership and management.B. is a legal entity.C. is closely regulated.D. has limited liability.Firms must provide the right incentives if they are to get -Select-shareholderscreditorsmanagersItem 1 to focus on long-run value maximization. Conflicts exist between managers and stockholders and between stockholders (represented by managers) and -Select-employeesdebtholderscustomersItem 2 . Managers' personal goals may compete with shareholder wealth maximization. However, managers can be motivated to act in their stockholders' best interests through (1) reasonable -Select-vacationcompensationperquisiteItem 3 packages, (2) firing of underperforming managers, and (3) the threat of hostile takeovers. If a firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover.-Select-StockholdersBondholdersItem 4 generally receive fixed payments regardless of how well the firm does, while -Select-stockholdersbondholdersItem 5 earn higher returns when the firm's earnings are higher. Investments in -Select-riskysafeItem…
- Which of the following statements is/are INCORRECT? O 1) Takeover threats tends to affect managerial behavior. 2) Corporations have the double taxation problem. O 3) Compensating managers with more stock options and less cash income can reduce the conflicts of interest between bondholders and managers. O 4) Both a and c are incorrect. 5) Both b and c are incorrect.2 (a)There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work? (b)There are some corporate strategists who have suggested that firms focus on maximizing market share rather than market prices. When might this strategy work, and when might it fail? (c)It is often argued that managers, when asked to maximize stock price, have to choose between being socially responsible and carrying out their fiduciary duty. Do you agree? Can you provide an example where social responsibility and firm value maximization go hand in hand?It is an axiom that may be characterized by managers making decisions that conflict with the best interest of the shareholders. a. the risk-return trade-off b. the agency problems c. the curse of competitive markets d. stockholders versus managers