Agency Costs of Free Cash Flow‚ Corporate Finance‚ and Takeovers Michael C. Jensen Harvard Business School MJensen@hbs.edu Abstract The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows—more cash than profitable investment opportunities. The theory developed here explains 1) the benefits of debt in reducing agency
Premium Corporate finance
Robert Johnson Eng. 099 Fran Bradshaw Feb. 5‚ 2010 Dressing for Success Have you ever thought that dressing for success could bring about success to your everyday life? A lot of people these days as far as young men and women usually dress in a very urban style dealing with clothes that may be nice but are often worn incorrectly. For example somebody could have on a nice pair of Levi jeans but wear them to where they sag all the way off of their butt which is improper and just doesn’t look
Premium Debut albums Dress Person
Federation and The United Kingdom are among the most powerful countries in the world we live in today. Both countries occupy spots in the top ten of the World GDP Rankings and also in the GDP rankings based on purchasing power parity. Their respective ranks on these lists prove the power of the countries through their massive spending‚ exports and consumption in international markets. Russia and the UK are both super powers however they run their countries in very different ways. The United Kingdom is a
Premium United States Russia World War II
What the United States Learned from the Vietnam War The United States made lots of mistakes in Vietnam. It stayed too long in the war‚ it failed to gather intelligence that could have saved lives‚ and we made rash decisions regarding the public’s reaction to us being there. The United States‚ at the most part‚ ignored these lessons as we continued some years later to invade Iraq and Afghanistan. But one mistake we did learn from was the allowance of free media in the war zone‚ and how
Free United States Cold War Vietnam War
Journal. Cost Management and Strategy – refer to your assigned questions and problems Cost Drivers and Basic Cost Concepts -- What is a cost? Define cost pools. What is a cost object? cost assignment? Contrast a direct cost with an indirect cost. Define cost allocation. What is an allocation base? Contrast cost assignment with cost allocation. What is a direct material? Direct labor? Indirect material? Indirect labor? factory overhead? What are conversion costs? Prime costs? What are the four
Premium Management accounting Costs Variable cost
statements. b. analyzing data. c. performance reports. *d. economic events. 4. _______________ is devoted to providing information for external users. a. Management accounting *b. Financial accounting c. Internal accounting d. Cost accounting 5. Financial accounting information is used for a. investment decisions. b. regulatory measures. c. stewardship evaluation. *d. all of these. 6. Which of the following is NOT part of the financial accounting information
Premium Enterprise resource planning Costs Information systems
The United States Government has 27 expressed powers. Almost all of the expressed powers of Congress are found in Article 1‚ section 8 of the Constitution. Expressed powers are those delegated powers of the National Government that are spelled out in the Constitution‚ they are also called the "enumerated powers"(McClenaghan). Three powers that stick out from the rest of the 27 are the commerce power‚ the borrowing power‚ and the power to declare war. Commerce is defined as the buying and selling
Premium United States Congress United States Constitution President of the United States
WHAT ARE COSTS AND PROFITS? HUNGRY HELEN’S COOKIE FACTORY • Helen‚ the owner of the cookie factory‚ buys flour‚ sugar‚ flavorings‚ and other cookie ingredients. • She also buys the mixers and the ovens and hires workers to run the equipment. • She then sells the resulting cookies to consumers. 2 TOTAL REVENUE‚ TOTAL COST‚ AND PROFIT • The amount that Helen receives for the sale of its output (cookies) is its total revenue. • The amount that the firm pays to buy inputs (flour‚ sugar‚ workers
Premium Profit Microeconomics Economics
Chapter 8 The Cost of Capital 236 CHAPTER 8—THE COST OF CAPITAL TRUE/FALSE 1. Capital refers to items on the right-hand side of a firm’s balance sheet. 2. The component costs of capital are market-determined variables in as much as they are based on investors’ required returns. 3. The cost of debt is equal to one minus the marginal tax rate multiplied by the coupon rate on outstanding debt. 4. The cost of issuing preferred stock by a corporation must be adjusted to an after-tax
Premium Dividend yield Net present value Weighted average cost of capital
would maximize their joint profits. This situation (illustrated in Appendix‚ 1.1)‚ shows the demand curve‚ given by DD‚ as the individual firm ’s share of the market demand under circumstances where the two firms are identical with respect to size and costs of production. To understand this behaviour of the collusive duopolies‚ a mathematical tool called ‘Game Theory’ is used. The classic example for the duopoly analysis here is the ‘Prisoner ’s-dilemma game’ (shown in Appendix‚ 1.2). Within this game
Premium Economics Marketing Game theory