Blaze Utilities owns 18% of the voting stock of Southwest Electric Power Company. The remainder of the Southwest stock is held by numerous investors with small holdings. Dee Falco, president of Blaze Utilities and a member of Southwest's board of directors. heavily influences Southwest Electric Power Company's policies. Under the market-value method of accounting for investments. Blaze's net income increases as it receives dividend revenue from Southwest Power. Blaze Utilities pays President Falco a bonus computed as a percentage of Blaze's net income. Therefore. Falco can control her personal bonus to a certain extent by influencing Southwest's dividends. A recession occurs in 20X0 and Blaze Utilities' income is low. Falco uses her power as a board member to have Southwest pay a large cash dividend. The action requires Southwest to borrow in order to pay the dividend. Required 1. In getting Southwest to pay the large cash dividend, is Falco acting within her authority as a member of the Southwest board of directors? Are Falco's actions ethical? Whom can her actions harm? 2. Discuss how using the equity method of accounting for investments would decrease Falco's potential for manipulating her bonus.