Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

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Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

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Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896

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Answer 2

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Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

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Answer 3

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Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

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Answer 4

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100%

Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

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Answer 7

Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

Answer 8

Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

Answer 9

Chapter 12, Problem 9PS

a)

Summary Introduction

To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

Answer 10

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

Answer 11

b)

Summary Introduction

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

Answer 12

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Answer 15

Ch. 12 - Prob. 1PS Ch. 12 - Terminology Define the following: a. Agency costs...Ch. 12 - Prob. 3PS Ch. 12 - EVA Here are several questions about economic...Ch. 12 - Accounting measures of performance The Modern...Ch. 12 - Economic income Fill in the blanks: A projects...Ch. 12 - Prob. 7PS Ch. 12 - Prob. 8PS Ch. 12 - Prob. 9PS Ch. 12 - Prob. 10PS

Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

Solution Summary: The author explains that agency problems arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

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To discuss: Agency problems would arise in capital investment decisions when paid fixed salary to plant and division managers without any bonus.

To discuss: Ways of manager’s compensation ties with economic value added to improve these problems.

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Chapter 12 Solutions