HW1 solution

HW1 solution - Solution to Problem Set 1 - FINA 4200 Spring...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Solution to Problem Set 1 - FINA 4200 Spring 2010 I. Multiple Choices 1. d 2. d 3. b 4. b 5. c 6. d 7. d 8. d 9. c 10. b 11. a 12. a 13. a 14. c 15. d 16. b 17. c 18. d 19. a 20. b 21. d 22. b 23. a 24. c 25. b 26. c 27. e 28. d 29. b 30. e 31. d 32. b 33. c 34. a 35. b 36. d 37. a 38. b 39. d II. Essay Questions Chapter 1 Q1. a . Stockholder wealth maximization is the appropriate goal for management decisions. The risk and timing associated with expected earnings per share and cash flows are considered in order to maximize the price of the firm’s common stock. d. An agency relationship arises whenever one or more individuals, the principals, hire another individual, the agent, to perform some service and then delegate decision-making authority to that agent. Primary agency relationships exist between (1) stockholders and managers, and (2) between debtholders and stockholders. e. Agency costs include all costs borne by shareholders to encourage managers to maximize a firm’s stock price rather than act in their own self-interests. The three major categories of agency
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

HW1 solution - Solution to Problem Set 1 - FINA 4200 Spring...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online