A. You are a shareholder in a C corporation. The corporation earns $2.00 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. Assume the corporate tax rate is 40% and the personal tax rate on (both dividend and non-dividend) income is 30%. How much is left for you after all taxes are paid? B. Recall the last time you ate at an expensive restaurant where you paid the bill. Now think about the last time you ate at a similar restaurant, but your parents paid the bill. Did you order more food (or more expensive food) when your parents paid? Explain how this relates to the agency problem in corporations. C. You are the CEO of a company and you are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency conflict here and how is it related to ethical considerations
Q No. 2
Read carefully the following scenarios and answer the questions asked in each scenario after analysis:
A. You are a shareholder in a C corporation. The corporation earns $2.00 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. Assume the corporate tax rate is 40% and the personal tax rate on (both dividend and non-dividend) income is 30%. How much is left for you after all taxes are paid?
B. Recall the last time you ate at an expensive restaurant where you paid the bill. Now think about the last time you ate at a similar restaurant, but your parents paid the bill. Did you order more food (or more expensive food) when your parents paid? Explain how this relates to the agency problem in corporations.
C. You are the CEO of a company and you are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency conflict here and how is it related to ethical considerations?
D. The following quote on Yahoo! stock appeared on April 11, 2016, on Yahoo! Finance:
If you wanted to buy Yahoo!, what price would you pay per share? How much would you receive per share if you wanted to sell Yahoo!?
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Yahoo! Inc. (YHOO) - NasdagGS * Watchlist
f Like 5.4K
Order Book
36.48 +0.41 (1.14%) 4:00PM EDT
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Historical Prices
After Hours : 36.79 t0.31 (0.85%) 7:55PM EDT - Nasdag Real Time Price
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36.32 - 36.85
Yahoo! Inc.
IYHOO
Prev Close:
36.07
Day's Range:
Apr 11, 4 00pm EDT
NEWS & INFOO
37.0
Open:
36.38
52wk Range:
26.15 - 46.13
Headlines
36.8
Press Releases
Bid:
36.78 x 800
Volume:
13,750,791
36.6
Company Events
Ask:
Avg Vol (3m):
36.79 x 300
17,662,300
36.4
Message Boards
1y Target Est:
38.03
Market Cap:
34.54B
Market Pulse
36.2
COMPANY
Beta:
2.16649
PIE (ttm):
N/A
Vahoot
36.0
10am
12pm
2pm
PrevioLIS Close
4 pm
Profile
Next Earnings Date:
19-Apr-16 E
EPS (tm):
-4.64
Key Statistics
Div & Yield:
N/A (N/A)
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