Question: Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firms board of

Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firm’s board of directors is controlled by management rather than outside directors, this might result in the firm’s retaining more earnings than can be justified from the stockholders’ point of view. Discuss those statements, being sure
(a) To discuss the interrelationships among cost of capital, investment opportunities, and new investment and
(b) To explain the implied relationship between dividend policy and stock prices.

Step by Step Solution

★★★★★

3.39 Rating (168 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

It is true that executives salaries are more highly correlated with the size of the firm than with p... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

43-B-C-F-C-S (112).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

1. Explain why AC is the perpendicular bisector of BD. AD; BC = DC; PR = QS,; P, Q, R, and S are the midpoints of AB, BC, DC, and AD respectively, Questions 2-5: Statements in a proof are provided....

A geckos toes have been shown to stick to walls through van der Waals forces. Van der Waals forces also exist between your finger and a wall. Why, then, doesnt your finger stick to the wall in the...

Two variables are given that have been shown to have correlation but no cause-and-effect relationship. Describe at least one possible reason for the correlation. Value of home and life span.

Two variables are given that have been shown to have correlation but no cause-and-effect relationship. Describe at least one possible reason for the correlation. Alcohol use and tobacco use.

Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firms board of directors is controlled by management rather than outside...

Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firm's board of directors is controlled by management rather than outside...

"Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firm's board of directors is controlled by management instead of by outside...

Executive salaries have been shown to be more closely correlated to the size of the firm than to its profitability. If a firms board of directors is controlled by management instead of by outside...

Executive salaries have been shown to be more closely correlated to the size of the firm | than to its profitability. If a firms board of directors is controlled by management instead of by outside...

Oak Hill has 74,806 registered automobiles. A city ordinance requires each to display a bumper decal showing that the owner paid an annual wheel tax of $50. By law, new decals need to be purchased...

Total aggregate claims S = X1 + +XN are modeled by a compound 122 RISK THEORY binomial distribution where N B(4, q = 1/2) and P(X = j) / j for j = 1, 2, 3, 4, 5. Determine the mean, variance,...

Internal forces that management administers to adapt to changes in external force

One of Polytech Inc.s manufacturing facilities burned down in February of 2019. An insurance settlement of $1.5 million was reached in August 2019. In October 2019, Polytech commenced construction of...

Which of the following cash flows are costs of financial distress? a). The court costs (court fees, lawyers, etc.) incurred when a firm enters bankruptcy. b). The interest payments that the firm...

Using Normal Approximation. In Exercises 5-8, do the following: If the requirements of np 5 and nq 5 are both satisfied, estimate the indicated probability by using the normal distribution as an...

1. Explain how an increase in U.S. and Canadian Intra-industry trade altered the level of productivity in the affected Canadian sector. 2. What were Canadas motives for proposing and signing the...

BE13.5 Identify the primary and other users of financial reports. LO4 In the table listing categories of users provided below, place a tick () in the correct column to identify which user categories...

Finally, assume that Bon Tempss earnings and dividends are expected to decline at a constant rate of 6% per year, that is, g = 6%. Why would anyone be willing to buy such a stock, and at what price...

Suppose Bon Temps embarked on an aggressive expansion that requires additional capital. Management decided to finance the expansion by borrowing $40 million and by halting dividend payments to...

How would each of the following scenarios affect a firm?s cost of debt, rd(1 ? T); its cost of equity, r s ; and its WACC? Indicate with a plus (+), a minus (?), or a zero (0) if the factor would...

1. Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project's anticipated cash flows? A. constant dividend...

FreeBSD, Mac OS , etc. ) among the AUBG students, the professor in Statistica conducted a survey with his 9 5 students. Assume that they represent a random sample.From the sample of 9 5 students, 2 8...

Pt 4 6. A researcher is studying the SAT 1 Math scores of two groups of students: those who plan to apply for financial aid and those that do not. Two independent random samples yield the following:...