1.. Should a company emphasize maximizing shareholder wealth or maximizing profits? Explain. Should ethics and social responsibility play a part in maximizing profits or shareholder wealth? These two clips from the movie “Other People’s Money” are excellent and relate to this week’s discussion.
2.Investigate some of the Sarbanes-Oxley (SOX) Act’s provisions for companies from the Internet, periodicals, or academic journals. Select one of these provisions, briefly describe it, and indicate why you think (or don’t think) financial statements will be more trustworthy if company financial executive implement this provision of SOX. In your research, did you find any corporate upper level management (CEOs, CFOs) persons that have served jail time? Has there been unintended consequences since SOX has been implemented?
3.The Lion Corp.(LC) issues a 30 year callable bond which is also convertible to 50 shares of LC common stock. Explain why LC would issue a bond with these features as opposed to just issuing a the bond without such options. As a bondholder, would you necessarily convert these bonds when the price of the stock reaches $22? Why or why not? Feel free to give examples in your response
4. Risk is a major concern of almost all investors. When shareholders invest their money in a firm, they expect managers to take risk with those funds. What do you think are the ethical limits that managers should observe when taking risk with other people’s money? You may also consider this question considering an investment in a mutual fund, therefore, you would be discussing the mutual fund manager’s role. You may also discuss what responsibility the investor bears.
5.Financial executives insist that there should be no separation between an individual’s personal ethics and his or her business ethics. “It’s a jungle out there” and “business is business” should not be excuses for engaging in unethical behavior. Many firms have ethics codes which are based on economically rational concepts such as integrity and trustworthiness, which guide the decision maker in attempting to increase shareholder wealth. Of course, some employees sometimes choose to not comply with their firm’s ethics code.How do ethics codes apply to project selection and capital budgeting? What are the potential risks to a company of unethical behaviors by employees? What are potential risks to the public and to stakeholders? Please explain how Saint Leo’s core value of integrity is reflected in your answer.
6.According to research, NPV and IRR are the most used methods of determining capital budgeting decisions. Another method that has received attention in recent years is the modified internal rate of return (MIRR). Discuss the positive and negative aspects of these. Finally, state the method you would use as a financial manager and explain why.
7.Gertrude and Gus are retired and have a substantial amount of savings in CDs. With rates near zero they are looking for a higher return and a broker suggests a large company with a long history of paying dividends (30 years). The dividend yield is a whopping 5.4%. The company maintains a constant payout ratio of 80%. They are considering putting a significant portion of their savings in this stock and want your expert financial advice. Please provide Gert and Gus the positives and negatives of such a purchase.
8.Is there a conflict between maximizing shareholder wealth and never paying bribes when doing business abroad? If so, how might you explain the firm’s position to shareholders asking why the company does not pay bribes when its foreign competitors in various nations clearly do so? Please explain how Saint Leo’s core value of responsible stewardship is reflected in your answer.