1. Golden Enterprises Inc. is a producer of medical pumps. The companys stock price dropped 15% last year due to worsening financial ratios and declining market share. The company is insolvent because its liabilities exceed the market value of its assets, and it does not have enough cash to meet its interest and principal payments. The stockholders are worried and threatening to vote out the management of the company and replace them with new ones. The board of directors of the company has asked the Chief Finance Officer, Christopher Valentine, MBA to address certain concerns as an outside group is soliciting proxies to overthrow management and take control of the business. The board wants to know how much the company is worth, what can be done to make the company more valuable, why stock price of the company is so volatile, and if it is possible to stop the outside group from taking over the business.

a. Explain the following terms to the management of Golden Enterprises:

i. proxy fight

ii. preemptive right

b. Identify and explain two main sources of entity value.