Podcast
Questions and Answers
What is the manager's utility function?
What is the manager's utility function?
What is the probability of high earnings ($500) if the manager works hard?
What is the probability of high earnings ($500) if the manager works hard?
What is the probability of low earnings ($200) if the manager shirks?
What is the probability of low earnings ($200) if the manager shirks?
What is the manager's disutility if she works hard?
What is the manager's disutility if she works hard?
Signup and view all the answers
What is the manager's disutility if she shirks?
What is the manager's disutility if she shirks?
Signup and view all the answers
How is the manager's compensation calculated?
How is the manager's compensation calculated?
Signup and view all the answers
What is the expected cash flow for Bumble in the first year of operations?
What is the expected cash flow for Bumble in the first year of operations?
Signup and view all the answers
What is the initial outlay required to acquire the computers?
What is the initial outlay required to acquire the computers?
Signup and view all the answers
If competition is fierce in all 3 years, what is the net present value of Bumble's cash flows over the 3-year period?
If competition is fierce in all 3 years, what is the net present value of Bumble's cash flows over the 3-year period?
Signup and view all the answers
Assuming no competition, what is the payback period for the initial $1,000 investment?
Assuming no competition, what is the payback period for the initial $1,000 investment?
Signup and view all the answers
What is the book value of the computers at the end of year 3?
What is the book value of the computers at the end of year 3?
Signup and view all the answers
If the market interest rate is 3%, what is the present value of Bumble's expected dividends over the 3 years?
If the market interest rate is 3%, what is the present value of Bumble's expected dividends over the 3 years?
Signup and view all the answers
If the manager accepts zero salary plus 30% of the profits before manager compensation from Red Ribbon Ltd, will they choose to work hard or shirk?
If the manager accepts zero salary plus 30% of the profits before manager compensation from Red Ribbon Ltd, will they choose to work hard or shirk?
Signup and view all the answers
What does EU(a1) represent in the scenario when the manager is working hard?
What does EU(a1) represent in the scenario when the manager is working hard?
Signup and view all the answers
In the scenario where Red Ribbon Ltd offers a zero salary plus 30% of profits, which component is considered as the variable part of the manager's compensation?
In the scenario where Red Ribbon Ltd offers a zero salary plus 30% of profits, which component is considered as the variable part of the manager's compensation?
Signup and view all the answers
What influences the manager's decision to choose between working hard and shirking?
What influences the manager's decision to choose between working hard and shirking?
Signup and view all the answers
Which compensation package results in a higher expected utility for the manager in both scenarios?
Which compensation package results in a higher expected utility for the manager in both scenarios?
Signup and view all the answers
What does the restricted classification indicate in this context?
What does the restricted classification indicate in this context?
Signup and view all the answers
What is the main reason the board should comprise members of different backgrounds, skills, and experience?
What is the main reason the board should comprise members of different backgrounds, skills, and experience?
Signup and view all the answers
Why should the board seek out more female candidates?
Why should the board seek out more female candidates?
Signup and view all the answers
Why should the board appoint younger members?
Why should the board appoint younger members?
Signup and view all the answers
What is the primary issue with the current composition of the board?
What is the primary issue with the current composition of the board?
Signup and view all the answers
What is the primary reason the board should appoint younger members?
What is the primary reason the board should appoint younger members?
Signup and view all the answers
What is the main issue with the current age composition of the board?
What is the main issue with the current age composition of the board?
Signup and view all the answers
What is the book value of Bumble according to the information provided?
What is the book value of Bumble according to the information provided?
Signup and view all the answers
According to Ohlson's formula, what is the firm value of Bumble?
According to Ohlson's formula, what is the firm value of Bumble?
Signup and view all the answers
What is the purpose of the auditor's suggested impairment of $200?
What is the purpose of the auditor's suggested impairment of $200?
Signup and view all the answers
If Bumble accepts the auditor's suggestion, what will happen to the firm value according to Ohlson's formula?
If Bumble accepts the auditor's suggestion, what will happen to the firm value according to Ohlson's formula?
Signup and view all the answers
What is the annual reduction in cash flow or expected abnormal earnings according to the auditor's expectation?
What is the annual reduction in cash flow or expected abnormal earnings according to the auditor's expectation?
Signup and view all the answers
What is the purpose of using the discounted cash flow approach in this context?
What is the purpose of using the discounted cash flow approach in this context?
Signup and view all the answers
