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mrs_skeptik [129]
2 years ago
8

Which one of the following actions by a financial manager is most apt to create an agency problem? Increasing current profits wh

en doing so lowers the value of the company's equity Refusing to expand the company if doing so will lower the value of the equity Refusing to lower selling prices if doing so will reduce the net profits Agreeing to pay bonuses based on the market value of the company's stock rather than on its level of sales Refusing to borrow money when doing so will create losses for the firm
Business
1 answer:
MrRissso [65]2 years ago
6 0

Answer: Increasing current profits when doing so lowers the value of the company's equity.

Explanation:

The main purpose of a company is to increase the wealth of shareholders. In their capacity as stewards for the company, managers should be working therefore to achieve this goal.

When management neglects this goal and begins to seek an improvement in their welfare and wealth instead of the shareholder', this is an Agency problem.

If a Financial manager is increasing current profits even though doing so will lower the value of the company's equity, this can create an agency problem because the shareholders are suffering but the finance manager might get rewarded for increasing profits.

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An investment banker agrees to underwrite an issue of 10 million shares of stock for TWResearch, Inc. on a firm commitment basis
tatuchka [14]

Answer: b) Loss of $7,500,000.

Explanation:

The total the investment bank paid when underwriting was:

= 10.50 * 10,000,000 shares

= $105,000,000

The total they then sell to the public is:

= 9.75 * 10,000,000

= $97,500,000

The profit is:

= Selling revenue from public - Buying cost from company

= 97,500,000 - 105,000,000

= -$7,500,000

4 0
3 years ago
Terms of a lease agreement and related facts were:
Feliz [49]

Answer:

1) January 1, 2018, asset leased

Dr Lease receivable 550,000

    Cr Equipment 550,000

January 1, incremental costs associated with lease transaction

Dr Lease receivable 6,652

    Cr Cash 6,652

January 1, 2018, first lease payment collected

Dr Cash 200,000

    Cr Lease receivable 200,000

2) to calculate the effective rate we can use the present value of an annuity due formula

PV annuity due factor, 3 periods, ?% = present value of lease receivable / annual payment = $556,652 / $200,000 = 2.78326

Now we must use an annuity due table to determine a possible rate. In this case, the exact rate is 8%.

3) December 31, 2018, interest receivable on lease contract

Dr Interest receivable 28,532

    Cr Interest revenue 28,532

interest receivable = ($556,652 / $200,000) x 8% = $28,532

5 0
3 years ago
Who is most likely to benefit when the Canadian dollar depreciates against the euro? A. Foreign sellers to Canadian buyers B. Ca
mariarad [96]

Answer:

A

Explanation:

When the Canadian dollar depreciates against the euro, the value of the Canadian dollar falls relative to the Euro.

For example, the exchange rate before the depreciation is 40 Canadian dollar / Euro. After the depreciation, it is 80 Canadian dollars / Euro.

Goods become more expensive for Canadian buyers of foreign goods. For example, a foreign good costs 160 Euros. Before the depreciation the good would cost (160 x 40) = 6400 Canadian dollars. After the depreciation, it would cost, 12,800 Canadian dollars.

Canadian sellers to foreign buyers don't benefit from the depreciation. Assume a local good costs 40 Canadian dollars. foreigners would pay 1 Euro for the good before depreciation. After depreciation, foreigners would pay 0.5 Euros for the good

6 0
3 years ago
Compute the takt time for a service system that intended to perform a standardized service. The system will have a total work ti
Mamont248 [21]

Answer:

2.98 minutes per cycle

Explanation:

Total work time = 352 minutes per day

Break time = 16 min*3 = 48 min

Lunch time = 60 min

Total time left =  352 - 48 - 60 =  244 min

Demand = 82 jobs a day

Takt time = Total production time available/Demand

Takt time = 244/82

Takt time = 2.9756

Takt time = 2.98 minutes per cycle

6 0
3 years ago
Assume you own 300 shares of ABC stock and recieve a stock dividend of 5%. As a result, the number of shares you own will change
kondaur [170]

Answer:

correct option is B. 315: 0

Explanation:

given data

existing share = 300 shares

stock dividend = 5%

to find out

number of shares you own will change and total wealth will increase by

solution

we get here new no of share that is express as

new no of share = existing share + ( stock dividend × existing share )    ...........1

put here value we get

new no of share = 300 + ( 5% ×300 )

new no of share = 300 + 15

new no of share = 315

and

stock dividend is not increase either company wealth or the stockholder wealth

so no of share increase with decrease per share

so that there is no change in wealth

so correct option is B. 315: 0

6 0
3 years ago
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