Académique Documents
Professionnel Documents
Culture Documents
Section I:
This morning, Bank of America announced that BoA will issue 50,000 shares of preferred stock with a liquidation value of $100,000 per share to Berkshire in a private offering.
This is a capital structure decision of BoA. The company raised some equity capital through this private offering.
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Determine how much money should be kept in the companys checking account to maintain daily operation?
Working Capital Management
Ultimate goal Maximize owners wealth or firm value Plausible Measures Maximize sales or market share? Minimize costs? Maximize current profits? Total asset / total capital in the accounting book? Firm value is intrinsic and forward-looking
Any proxies? stock price, or market value of a company It is more difficult to estimate value of private firms
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Google Inc. (NASDAQ: GOOG) and Motorola Mobility Holdings, Inc. (NYSE: MMI) today announced that they have entered into a definitive agreement under which Google will acquire Motorola Mobility for $40.00 per share in cash, or a total of about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares on Friday, August 12, 2011. The transaction was unanimously approved by the boards of directors of both companies.
Value of Manager
Shares in Apple sank on Thursday, as the company faced a future without its founder and visionary Steve Jobs at the helm.
A total of 8.9% drop in Wednesday after market and Thursday pre-market
Value of Manager
Yahoo! board fires CEO Carol Bartz over the phone. Stock price jumps up more than 6% to 13.72 from 12.91 in the after market.
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Sole proprietor
Corporation
owned by one person, and managed by the same person unlimited liability taxed only once
limited liability double taxation easy to transfer ownership (secondary market) easy to raise large amount of equity capital (primary market)
difficult to transfer ownership difficult to transfer ownership very limited equity capital more equity capital available, but still limited
Agency relationship
Principal hires an agent to represent his/her interests Stockholders (principals) hire managers (agents) to run the company
Agency problem
Conflict of interest between principal and agent
Agency costs
Managements decision may not be to the best interest of shareholders Monitoring costs, e.g., hiring outside accountant to audit
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Corporate Governance
Board of Directors
Elected by shareholders Hire and fire managers Direct intervention
Managerial compensation
Incentives can be used to align management and stockholder interests
Takeover threat