Your business has been open for a month, and you have prepared an income statement and completed a variance analysis on the data. Now you will meet with investors and a few other internal stakeholders to share your company’s progress over the past month and how it has performed with respect to your cost and budget projections. The investors would like to see the thought process behind your financial strategy and how your company has performed in its first month. They have therefore asked you to present a report that includes the costing and income data from your Project Workbook.

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 market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to 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. 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. If you expanded and hired additional people to help you, might that give rise to agency problems? Explain your answer Suppose you need additional capital to expand, and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?  Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate the agency costs? Suppose your company is very successful, and you cash out most of your stock and turn the company over to an elected board of directors. Neither you nor any other stockholders own a controlling interest (this is the situation at most public companies). List six potential managerial behaviors that can harm a firm’s value.  What is corporate governance? List five corporate governance provisions that are internal to a firm and under its control. What characteristics of the board of directors usually lead to effective corporate governance? List three provisions in the corporate charter that affect takeovers. Briefly describe the use of stock options in a compensation plan. What are some potential problems with stock options as a form of compensation? What is block ownership? How does it affect corporate governance? Briefly explain how regulatory agencies and legal systems affect corporate governance.

Confidence IntervalsIn this week’s reading, we discussed different types of samples, their distributions, sampling errors, probabilities, and confidence intervals. Using Excel or StatTools, complete the following Problem. This is similar to Problem 33 in Chapter 8 on page 351.Problem - You have been assigned to determine whether more people prefer Coke or Pepsi. Assume that roughly half the population prefers Coke and half prefers Pepsi. How large a sample do you need to take to ensure that you can estimate, with 90% confidence, the proportion of people preferring Coke to within 5% of the actual value? Show all of your work.