Need assistance on these Managerial Finance Questions
The purpose of this assignment is to explain core concepts related to corporate valuation and governance and to identify strategies for conducting business with personal and professional integrity.
Read the Chapter 13 Mini Case in Financial Management: Theory and Practice. Using complete sentences and academic vocabulary, please answer questions a through d.
Using the mini case information, write a 250-500 word letter of intent discussing specific strategies for how you will conduct your start-up business with personal and professional integrity.
While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines.
Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your
product is a software platform that integrates a wide range of media devices, including
laptop computers, desktop computers, digital video recorders, and cell phones. Your
initial market is the student body at your university. Once you have established your
company and set up procedures for operating it, you plan to expand to other colleges in
the area and eventually to go nationwide. At some point, hopefully sooner rather than
later, you plan to go public with an IPO and then to buy a yacht and take off for the South
Pacific to indulge in your passion for underwater photography. With these issues in
mind, you need to answer for yourself, and potential investors, the following questions.
a. What is an agency relationship? When you first begin operations, assuming you
are the only employee and only your money is invested in the business, would any
agency conflicts exist? Explain your answer.
b. If you expanded and hired additional people to help you, might that give rise to
agency problems?
c. Suppose you need additional capital to expand, and you sell some stock to outside
investors. If you maintain enough stock to control the company, what type of agency
conflict might occur?
d. Suppose your company raises funds from outside lenders. What type of agency costs
might occur? How might lenders mitigate the agency costs?
