Corporate Financial Management Assignment
Question 1 - In recent years, large financial institutions such as mutual funds, investment bank and pension funds have become the dominant owners of stock in the United States. The research shows that about 73% of ownership in large U.S. corporate are held by these institutional investors. In German, the dominant shareholders are usually Investment Bank. Moreover, these institutions are becoming more active in corporate affairs. What are the implications of this trend for agency problem and corporate control?
Question 2 - In Australia, the Australian Stock Exchange recommends that the majority of the board should be independent directors. However, there has been a lot of debate among scholars about the value of board of directors, especially for independent or outside directors. Many researchers argue, because of the competition in product and labour market, the managers' interests are aligned with the interests of shareholders. Therefore, directors may not necessarily provide extra value to the firm by reducing the potential agency costs. However, those who believe the board of directors is a key mechanism of corporate governance acknowledge that directors, especially independent directors, monitor managers' behaviour and create value for shareholders. Which arguments do you agree? What are the advantage and disadvantage of having independent directors in public listed companies?
Question 3 - The role of financial managers is maximizing shareholders' wealth. In order to achieve this, financial managers would like to increase firm's stock price. Therefore, the goal of financial managers is to maximize the current share price. If we assume the financial market is efficient, why is the goal of financial manager to maximize firm's current share price rather than future share price? In other words, are there any differences between the goal of maximizing current share price and the goal of maximizing future stock price?
Question 4 - An investor purchasing an Australian Government Bond is entitled to receive annual payments from the Australian government forever. What is the price of a Government Bond that pays $160 annually if the next payment occurs one year from today? The market interest rate is 4.7 percent per annum.
Question 5 - An investment offers $4,900 per year for 15 years, with the first payment occurring one year from now. If the required return is 8 percent per annum, what is the value of the investment? What is the value of the investment at the end of year 15?
Need 600 Words for Question 1 to 3 and Question 4-5 are calculation based.