28% 10:55 PM rizon a blackboard.strayer.edu 11 Freddie Hyman 4 2 Suppose you dec

Question

28% 10:55 PM rizon a blackboard.strayer.edu 11 Freddie Hyman 4 2 Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your G initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPCo and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors the following questions

Explanation / Answer

Agency relationship is the relationship between principal ( shareholder) and the agent (management). Management is hired to act to maximise the value of share and hence the wealth of shareholders. Agency conflict/ cost arises when management acts to expand business and increase their own financial benefit whereas the shareholder wants to increase the share value. For the case given in the question , both principal and agent are the same person. So no agency conflict happens.

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