Please read each case and answer the corresponding questions below.Each answer should be extremely thorough and supported with substantial relevant details.
Case 1:
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 body is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand it to other colleges in the area, and eventually 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.
1. 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.
2. If you expanded and hired additional people to help you, might that give rise to agency problems?
3. Suppose you need additional capital to expand and you need tosell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?
4. Suppose your company raises funds from outside lenders. What types of agency costs might occur? How might lenders mitigate the agency cost?
Case 2:
Part 2 Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer, Inc. One of the firm's clients is Michelle DellaTorre, a professional tennis player who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of money through Balik and Kiefer. Della Torre is very bright, and would like to understand in general terms what will happen to her money. Your boss had developed the following set of questions you must answer to explain the U.S Financial system to Della Torre.
1. Why is corporate finance important to all managers?
2. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form?
3. How do corporations go public and continue to grow? What are agency problems? What is corporate governance?
4. What should the primary objectives of managers?
5. Do firms have any responsibility to society at large?
6. Is stock price maximization good or bad for society?
7. Should firms behave ethically?
8. Use the case information and write a 250-500 word letter of intent discussing specific strategies for conducting business with personal and professional integrity and it must be extremely thorough and includes substantial supporting details and examples.