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In developing a compensatory share option plan, a company's objective is
- to motivate executives and employees to manage the company in a way that increases stock price.
- to decrease employee turnover.
- to enhance compensation packages without having to expend cash.
- to do all of these options.
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- Please share what variables/factors that you find most important or relevant to informing the decisions facing management within the scenario. Acquiring the competition is often an option to penetrate untapped markets, increase market share, and realize elevated stock performance. As the CFO, you have identified a clear opportunity to become the dominant leader in retail pharmaceutical sales through the acquisition of your principal competitor. The key capital investment trade-off decision facing the organization is whether your organization should acquire the competitor or expand by building new stores throughout the continental United States. What factors will influence your decision?The rationale behind granting stock options is toinduce employees to work harder and be moreproductive. As the stock price increases (presumably due to their hard work), the employees sharein this added wealth. Another way to share thiswealth would be to grant shares of stock ratherthan options. What are the advantages anddisadvantages of using stock options rather thanshares of stock as employee incentives?A company might purchase treasury stock for all of the following reasons excepta. it wants to increase its net assets by buying its stock low and reselling it at a higher price.b. management wants to decrease the earnings per share of common stock.c. management wants to avoid a takeover by an outside party.d. the company needs the stock to distribute to employees as part of its employee stockpurchase plans.
- Ay 2. Management of companies constantly have to manage dividend policy between the needs of the company and the needs of the shareholders. Explain how managers make decisions on dividend policy, and how this helps them to make better “investment decisions.”Which of the following statements is FALSE? By tying compensation to performance, shareholders aim to prevent/reduce agency problems. Increasing the pay-for-performance sensitivity comes with the added benefit of reducing manager's risk. During the 1990s, most companies adopted compensation policies that more directly gave managers an ownership stake by including grants of stock or stock options to executives. Stock and option grants give managers an incentive to increase the stock price to make their stock or options as valuable as possible.a) Suggest how stockholders' direct engagement with managers and management remuneration may be utilised to guarantee managers operate in the best interests of shareholders by maximising shareholder value. b) Explain the link between the Weighted Average Cost of Capital (WACC) and If you use market values to calculate the WACC and your stock price or bond prices become erratic, elaborate how this will influence your capital structure and, as a result, the firm’s investment choice.
- When venture capitalists take an active role in the management of a company they finance, they are trying to alleviate the moral hazard problem. Group of answer choices True FalseIn case you retain huge amount of profit of your company for long term investment, what financial decision do you take – to pay high cash dividend? Or to issue bonus share (stock dividend)? And explain why?Discuss the topic of maximizing shareholder wealth. This topic has been researched and studied for many years, with mixed results. For example; Irving Fisher, a prominent American Economist, argued that maximizing shareholders wealth should be management’s primary goal. Conversely, Sollars and Tuluca suggested that shareholders should only be rewarded with returns that are commensurate with the risk they take. Explain the advantages and disadvantages of wealth maximization from the perspective of a company’s Chief Financial Officer. Include the effect on company stakeholders – internal (managers, employees) and external (suppliers, shareholders).
- How does a firm's dividend policy reflect its approach to financial decision-making, and what are the two primary strategies discussed in this context? A. Explain the concept of treating dividends as the residual part of a financing decision. B. Outline the key characteristics and principles of an active dividend policy strategy. C. Compare and contrast the implications of these two strategies on a firm's overall financial management. D. Provide examples illustrating situations where each strategy may be suitable for a firm. E. Assess the potential impact of a firm's dividend policy on investor perceptions and shareholder value. Choose the correct options (A, B, C, D, or E) to complete the statement, considering the various aspects of a firm's dividend policy and its significance in financial decision-making.Give typing answer with explanation and conclusion The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize its expected EPS. b. Minimize the chances of losses. c. Maximize the stock price on a specific target date. d. Maximize its expected total corporate income. e. Maximize the stock price per share over the long run, which is the stock's intrinsic value.