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
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000 XQ-104 15‚000 25 375‚000 Totals 40‚000 $675‚000 Six Months XQ-103 45‚000 $12 $540‚000 XQ-104 27‚000 25 675‚000 Totals 72‚000 $1‚215‚000 The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June‚ 28‚000 units of direct materials are purchased at a cost of $4.70 per unit‚ and 28‚000 units of direct materials are used to produce 9‚000 units of Product B. Compute the total materials variance and the price and quantity
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colossal giants crumbling to their knees. The prime aim is to throw light at the subtle inconsistencies that can cost the companies far more than just money but their entire image. The asset of ‘good will’ has its nemesis in these unethical practices surfacing. Management accountants work inside a company‚ handling all internal accounting data. These individual often allocate production costs‚ create management reports and provide support for managerial decisions. Ethical issues can result from managerial
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Reverse Engineering A brilliant method of taking an object apart and disassembling all of its mechanical components and analyze every bit of detail‚ enough to recreate a duplicate without fully understanding the original. Reverse engineering is used for many reasons‚ for example; a military obtains an enemy tank that is in good enough condition to be operated‚ they can have their engineers take the machinery apart and gain the knowledge on how to duplicate the same class tank without having to
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prevents them from dying. The increasing demand and dependence on medication has led to an increase of the cost and prices of medication to skyrocket into the unaffordable price range. With this soaring costs happening‚ it seems that the pharmaceutical industry is starting to care more about their profits‚ rather than the main focus‚ which is the people of the world. In recent years‚ the cost of certain
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Chapter 6--Process Costing Student: ___________________________________________________________________________ 1. A process is a series of activities or operations‚ which are linked to perform a specific objective. True False 2. The cost flows for a process-costing system are totally different from those of a job order costing system. True False 3. Process systems are characterized by a larger number of homogeneous products passing through a series of processes. True False
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Cost of Living and Minimum Budget For A Family of Four by Silicon Valley Blogger on 2007-10-3052 This is part of our series on “scary money tips and stories”. In some high cost of living areas‚ it now takes at least almost $80‚000 to live. I’ve often expressed how life changes once you have a family to raise‚ beyond the time and effort it takes to care for kids and run the household. Financially‚ it can become somewhat more challenging as well: since the typical case is that your budget rises
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More Schools Choose to Teach Abstinence-Plus The article describes how an increasing number of teenage pregnancies in Texas are increasing at an alarming rate. That around 172 pregnant girls are enrolled in the city’s public schools and some as young us 13 are pregnant. Even more astounding number is that around 22‚000 students have reported to have sexually transmitted infections. This has led the school board to institute a new curriculum an abstinence-plus program for seventh and eighth graders
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employees (NSHR). For the success of the project PRINCE2 (PRINCE2[1]) Process Model has been adopted as shown below Figure2 and than translated in the project vertical chain shown in Figure3. Figure2 TCE literature Transaction cost economics (TCE) theory become popular during the 80s and 90s‚ however its first definition can be found in the famous Coase’s paper on “The Nature of the Firm”. Coase‚ in contraposition with economist’s idea since Adam Smith (1776) that market mechanism
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expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocated to planned production? What was the actual cost per unit of production and shipping. 3. Prepare a flexible budget for 180‚000 iPhone 4’s and calculate flexible budget variances using actual costs for August. 4. Estimate material price and usage for flash memories‚ labor rate and usage (efficiency) variances‚ and the overhead spending variance for August. 5. What are some strategies or decisions
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