To discuss: The meaning of agency problems and way wherein agency problems give a rise to agency cost.
Introduction:
An authorized person who acts on the behalf of another person or investor to buy or sell securities is termed as agent. The person who appoints the agent is termed as principal.
To discuss: The way wherein the corporate governance structure helps to avoid agency problems.
Introduction:
The way wherein the stakeholders of a company control the affairs of the firm to guarantee their return on investment is termed as corporate governance.
The managers of the firm are appointed to work in maximizing the investor’s wealth. In a corporation, the control of an organizational structure and separation of ownership will give rise to conflicting interest. Every managers face ethical dilemma of whose interest to serve their own or the investors to whom he/she is responsible. This agency conflict takes place when there are different stakeholders in an organization because everyone will have their own interests.
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Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
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- To invest in a project, a company needs $50 million. Given its flotation costs of 7%, how much does the company need to raise? Multiple choice question. $53.76 million $46.50 million $50.00 million $53.50 millionarrow_forwardWhile determining the appropriate discount rate, if a firm uses a weighted average cost of capital that is unique to a particular project, it is using the Blank______. Multiple choice question. economic value added method pure play approach subjective approach security market line approacharrow_forwardWhat are flotation costs? Multiple choice question. They are the costs incurred to issue new securities in the market. They are the costs incurred to insure the payment due to bondholders. They are the costs incurred to meet day to day expenses. They are the costs incurred to keep a project in the business.arrow_forward
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