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Give an example of a business process where the interests of two (or more) stakeholders are in opposition.

Organizations are complex systems with multiple stakeholders. Sometimes the interests of various stakeholders can conflict. For your initial post to this discussion, give an example of a business process where the interests of two (or more) stakeholders are in opposition.

John Smith received $160,000 from his father s estate. He placed the funds into the hands of a broker who purchased the following securities on John s behalf:

1) Common Stock at a cost of $80,000.The stock paid no dividends but it was sold for $180,000 at the end of 4 years.

2) Preferred Stock was purchased at par value of $30,000.The stock paid a 6% dividend (based on par value)each end of year for 4 years. At the end of 4 years the stock was sold for $24,000

3) Bonds were purchased at a cost of $50,000.The bonds paid $3,000 in interest every 6 months. At the end of 4 years, the bonds were sold for $58,500.

Required:

1) Using a 20% discount rate, compute the NPV of each of three investments. On which investments John earned 20% rate of return?

2) Considering all three investments together, did John earn a 20% rate of return? Explain

3) John wants to use the $262,500 proceeds from the sale of securities to open a restaurant under a 10 year contract. What net annual cash flow must the restaurant generate in order to earn a 16% return over a 10 year period? John will not receive his original investment at the end of the contract.

Two different companies of approximately similar financial strength and with similar management teams both have 30 year bonds that trade in active secondary markets. Company A is located in a country with relatively small increases in overall price levels; its bonds have a 4% return. Company B is located in a country with relatively large increases in overall price levels each year; its bonds have a 14% return.

What is the difference in the interest rate between Company A bonds and Company B bonds called?

Describe the capital budgeting process and explain the meaning of a positive versus a negative NPV. What opinions might shareholders have on selecting projects using the NPV? Explain. What might happen to a management team that persistently selects negative NPV projects? Explain.

A key goal of tax planning is to legally minimize or defer taxes. This is done by focusing on key components of taxable income. How can timing strategies and income shifting strategies be used to affect deductions for adjusted gross income (AGI), dependency exemptions, itemized deductions, and tax credits? Provide at least one example for each.

a) What format (s) did these companies use to present their balance sheets?
b) How much working capital did each of these companies have at the end of 2007? Speculate as to the rational for the amount of working capital they maintain.
c) What is the difference in the asset structure of the two companies ? What causes the difference?
d) What are the companies annual and 5 year (2003 2005) growth rates in total assets and long term debt?
What were these two companies trends in net cash provided by operating activites over the period of 2005 2007?