4. 5 points (a) Explain why, on a perfect capital market, a profit-maximizing firm should focus on maximizing its market value. Why will there be no difference in opinion about the trade-off between consumption today and in the future (or the appropriate investment projects to start) among the owners of limited share company? 2p (b) Discuss the principal-agent problem between owners and managers. What is the central problem(s) with limited share companies cap- tured by this term? lp (c) Explain why concentrated ownership could be a solution to the principal-agent problem? 1p (d) What are the problems of concentrated ownership and how could it be solved? lp 4. 5 points (a) Explain why, on a perfect capital market, a profit-maximizing firm should focus on maximizing its market value. Why will there be no difference in opinion about the trade-off between consumption today and in the future (or the appropriate investment projects to start) among the owners of limited share company? 2p (b) Discuss the principal-agent problem between owners and managers. What is the central problem(s) with limited share companies cap- tured by this term? lp (c) Explain why concentrated ownership could be a solution to the principal-agent problem? 1p (d) What are the problems of concentrated ownership and how could it be solved? lp