Critical Essay

Topics: Corporation, Finance, Tax Pages: 3 (442 words) Published: August 28, 2013
Chapter 1 Corporate Finance and the Financial Manager

Problem 4
What are the main advantages and disadvantages of organizing a firm as a corporation?


Problem 8
What is the most important type of decision that the financial manager makes?

Problem 10
Corporate managers work for the owners of the corporation. Consequently, they should make decisions that are in the interests of the owners, rather than their own. What strategies are available to shareholders to help ensure that managers are motivated to act this way?

Problem 13
You are the CEO of a company and you are considering entering into an agreement to have your company buy another company. You think the price might be too high, but you will be the CEO of the combined, much larger company. You know that when the company gets bigger, your pay and prestige will increase. What is the nature of the agency conflict here and how is it related to ethical considerations?

Problem 14
What is the difference between a public and private corporation?

Calculation questions
Question 1)
ValiantCorp is a corporation that earned $3 per share before it paid any taxes. ValiantCorp retained $1 of after tax earnings for reinvestment, and distributed what remained in dividend payments. If the corporate tax rate was 30% and dividend earnings were taxed at 12.5%, what was the value of the dividend earnings received after tax by a holder of 100,000 shares of ValiantCorp?

Question 2)
A corporation earns $7.40 per share before taxes and the company pays a dividend of $5.00 per share. The corporate tax rate is 39%, the personal tax rate on dividends is 15%, and the personal tax rate on non-dividend income is 36%. What is the after-tax amount an individual would receive from the dividend?

Concept check questions

1.What is a limited liability company (LLC)? How does it differ from a limited partnership?

2. What are the...
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