(A)

i) Define the agency problem and explain how it contributes towards agency costs? How can the agency problem and agency costs be reduced by a properly constructed corporate governance structure? (7 marks)

ii) Explain the differences between financial markets and financial institutions? (6 marks)

(B)

i) ABC Corporation received pretax profits of RM1.2 million, an average tax rate of 34 percent, and it paid preferred stock dividends of RM50,000. There were 100,000 shares outstanding and no interest expense. What was ABC Corporation's earnings per share? (6 marks)

ii) A firm has projected sales in May, June, and July of RM100, RM200, and RM300, respectively. The firm makes 20 percent of sales for cash and collects the balance one month following the sale. What is the firm's total cash receipts in July? (6 marks)