Question

Question 1
Describe agency conflict and the measures that can reduce the possibility of such a conflict in a corporation.

Your response should be at least 250 words in length. You may use only your textbook as source material for your response. All source material must be referenced (Paraphrased and quoted material must have accompanying citations). You may use the Publication Manual of the American Psychological Association (APA Style Guide) or the CSU Citation Guide for reference.

Question 2
Holding Period Return
Based on the following information calculate the holding period return:
P0 = $14.00
P1 = $17.40
D1 = $ .42

Question 3
Risk & Return and the CAPM.
Based on the following information, calculate the required return based on the CAPM:
Risk Free Rate = 3.75%
Market Return =10%
Beta = 1.32

Question 4
Based on the information below, calculate the weighted average cost of capital.
Great Corporation has the following capital situation.
Debt: One thousand bonds were issued five years ago at a coupon rate of 8%. They had 25-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 39%
Preferred stock: Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They're now selling to yield 8%.
Equity: Great Corp has 133,000 shares of common stock outstanding, currently selling at $12.48 per share. Dividend expected for next year is $.80 and the growth rate is 6%.

Question 5
Construct a pro forma income statement for the first year and second year for the following assumptions:
o Units of Sales in Year 1: 110,000
o Price per Unit: $11
o Variable cost per unit: 25%
o Fixed Costs: $129,000
o Income taxes: 20%
o Interest Expense: $170,000
o In year 2, Price per unit increases to $13.50, and unit of sales increases by 4%, all other assumptions remain the same.

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