1. What can be done to reduce agency problems? (Choose one)

a) Monitoring

b) Management Compensation

c) Incentive Compensation

d) Monitoring Pay for Performance

e) All of the above

2. A firm has an average investment of $1,500 mln during the year. During the same time, the firm generates after-tax earnings of $340 mln. Calculate the economic value added (EVA) for the firm. (The cost of capital is 12 percent)

a) $260 million

b) $160 million

c) $340 million

d) $120 million