Question

can anyone help me to solve these q?please!!

Question 1 What is the main reason that cause agency problem to occur between the managers and the shareholders in a company? Question 2 Today, you deposit $15,000 in a bank account that pays 8 percent annual simple interest. How much interest will you earn over the next 6 years? Question 3 You want to have $300,000 in cash for down payment of a property 5 years from today. You expect to earn 5.2 percent per year, compounded semi-annually, on your savings. How much do you need to deposit today if this is the only money you save for this purpose? Question 4 Assuming that this is the beginning of the year. Wealth Investment is trying to sell you a 10-year investment policy. The policy will pay you $30,000 at the end of each of the next 9 years. The final payment will be a payment of $100,000 at the end of year 10. If the required return is 8 percent per year, how much are you willing to pay for this investment policy?

Answer 1

You have asked multiple unrelated questions in the same post. I have addressed the first one. Please post the balance questions separately one by one.

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Question 1

The main reasons for the agency problems to arise between the managers and shareholders is:

• Misalignment between the goals of the management and the shareolders

Shareholders have the goal of achieving long term value creation for the firm. Their vision is long term and not focussed on short run profitability. Managers, at times get misaligned and start focussing on short term profitability as a part of their compensaton is linked to the profits of the firm at the end of the year. Managers may be inclined to take risky and aggressive projects to boost the temporary cash flows and profitability, however this may not gel well with shareholders want. They want steady, stable cash flows throughout the life of the firm.

Hence, the misalignment between the goals of the shareholders and managers, is the primary reaon for agency problems.