When management and ownership are separate, a firm can incur agency costs. These costs are due to a misalignment of goals where
PART A
When management and ownership are separate, a firm can incur agency costs. These costs are due to a misalignment of goals where the manager’s goals are not the same as owners’ goals. The resulting costs often come in the form of excessive consumption of perquisites. Go to the internet and do a search for Dennis Kozlowski of Tyco, then report your findings.
Please answer the following:
- Who is Dennis Kozlowski?
- Identify at least THREE of the agency costs incurred by Tyco shareholders that were the result of Kozlowski’s excessive consumption of perks.
PART B
As you read in the chapter, dividend announcements often convey information about a firm’s prospects. In an efficient market investors rapidly make buy and sell decisions that cause this new dividend information to be quickly reflected in the company’s stock price. Go to the internet and search for “dividend announcements”, and find an article about a specific dividend announcement that resulted in a change in stock price. After you find your article, answer the following questions.
Please answer the following:
1. Provide a citation (web site address so I can look it up) of the article and list the dividend change that occurred.
2. What has happened to stock price since the announcement? Is this what you would expect given the content of the article?
PART C
In the text, you learned how to calculate the maximum sustainable growth rate that gives you information on how fast your firm can grow without obtaining additional financing. This topic is critical since a common reason for business failure is growing too fast. Think about the material in the chapter on sustainable growth and then try to answer the following questions.
Please answer the following:
1. How could growing too fast create problems for a firm?
2. What other factors do you need to consider when experiencing rapid growth?
PART A When management and ownership are separate, a firm can incur agency costs. These costs are due to a misalignment of goals where the manager’s goals are not the same as owners’ goals. The resulting costs often come in the form of excessive consumption of perquisites. Go to the internet and do a search for Dennis Kozlowski of Tyco, then report your findings.
Please answer the following:
1. Who is Dennis Kozlowski?
2. Identify at least THREE of the agency costs incurred by Tyco shareholders that were the result of Kozlowski’s excessive consumption of perks.
PART B As you read in the chapter, dividend announcements often convey information about a firm’s prospects. In an efficient market investors rapidly make buy and sell decisions that cause this new dividend information to be quickly reflected in the company’s stock price. Go to the internet and search for “dividend announcements”, and find an article about a specific dividend announcement that resulted in a change in stock price. After you find your article, answer the following questions.
Please answer the following:
1. Provide a citation (web site address so I can look it up) of the article and list the dividend change that occurred.
2. What has happened to stock price since the announcement? Is this what you would expect given the content of the article?
Please answer the following:
1. How could growing too fast create problems for a firm? 2. What other factors do you need to consider when experiencing rapid growth?
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