The board of directors of JinFeng Inc .( JF ), which adopts cleaner production technology, is...

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The board of directors of JinFeng Inc .( JF ), which adopts cleaner production technology, is discussing an incentive plan drafted by its CEO, Michael Roberts. According to the plan, a 1% of the yearly earnings will be used as bonus to the management. JF ' s next year earnings are expected to be $9 per share. JF has announced its dividend policy as distributing 40% of its earnings as cash dividend, and retaining the other 60% of its earnings invested in projects with an expected return of 12% per year. The market capitalization rate of JF is required to be 15% per year. If you're an independent director, should you vote to agree the plan? Give your reasons for your judgment. Also, please determine JF stock's dividend yield and capital gain. The board of directors of JinFeng Inc .( JF ), which adopts cleaner production technology, is discussing an incentive plan drafted by its CEO, Michael Roberts. According to the plan, a 1% of the yearly earnings will be used as bonus to the management. JF ' s next year earnings are expected to be $9 per share. JF has announced its dividend policy as distributing 40% of its earnings as cash dividend, and retaining the other 60% of its earnings invested in projects with an expected return of 12% per year. The market capitalization rate of JF is required to be 15% per year. If you're an independent director, should you vote to agree the plan? Give your reasons for your judgment. Also, please determine JF stock's dividend yield and capital gain.

Answer rating: 100% (QA)

SOLUTION As an independent director I would not vote to agree to the incentive plan drafted by the CEO Here are my reasons The plan incentivizes the m... View the full answer