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A: ANswer - Option C is Correct Option - C. It Maximizes the Share Prices of the Company .
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Q: Write a brief description of the logic behind the development of the time value formula for…
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- how do compensation plans, including bonus structures, drive behavior? How can transfer pricing, for example, lead to outcomes that are not in the best interests of the organization? What do you think about executive bonuses tied to stock prices in a public company? What other issues can you see with compensation plans?CEO compensation design is effective in controlling the behavior in their decision making. How a compensation package could possibly work in adjusting a CEO’s risk taking behavior (in investments) and in balancing long-term vs. short term interests of a company?If a company’s board of directors wants management to maximize shareholder wealth, should the CEO’s compensation be set as a fixed dollar amount, or should the compensation depend on how well the firm performs? If it is to be based on performance, how should performance is measured? Would it be easier to measure performance by the growth rate in reported profits or the growth rate in the stock’s intrinsic value? Which would be the better performance measure? Why?
- (Corporate Finance) How can employee compensation be designed to reduce agency costs?If a company’s board of directors wants management to maximize shareholder’s wealth, should the CEO’s compensation be set as a fixed amount, or should the compensation depend on how well the firm performs? If it is based on performance, how should performance be measured? Would it be easier to measure performance by the growth rate in reported profits or the growth rate in the stock’s intrinsic value? Which would be the better performance measure? Why?Explain the role of agency conflicts between managers, shareholders, and bondholders in corporate payout policy.
- Explain the Threat and Opportunity of Shareholder Activism ? Explain the Effect of Executive Compensation on the Cost of Equity? Why Corporate Governance Is Important to Investors?A good way to align the incentives of a CEO with those of shareholders is to make his pay directly related to earnings (or cash flows) per share (EPS), since an increase in earnings always leads to an increase in shareholder value. True or FalseDiscuss the tension between Corporate Social Responsibility and the management's fiduciary duty to maximize shareholder returns.
- Which one of the following actions by a financial manager creates an agency problem? Lowering selling prices that will result in increased firm value Agreeing to expand the company at the expense of stockholders' value Borrowing money when doing so creates value for the firm Agreeing to pay management bonuses based on the market value of the firm's stockWrite a brief description of the logic behind the development of the time value formula for annuities. Why does stock-based compensation create a moral hazard for executives?Why should a financial decision maker such as a corporate treasurer or CFO be concerned with market efficiency?