Assessing the Geal of Sperts Products, Inc. Loren Seguara and Dale Johnson both work for Sports Products, Inc., major producer of boating equipment and accessories.Loren works as a clerical assistant in the Accounting Department and Dale works as a packager in the Shipping Department During their lundh break one day they began talking about the company. Dale complained that he had always worked hard trying not to waste packing materals and efidienty and cost-effectively pedforming his job. In spite of his efforts and those of his co-workers in the department, the firm's stock price had decined neady $2.00 per share over the past 9 months Loren indicated that she shared Dale's frustration, partioularly because the fim's profits had been dsing. Neilther could understand why the ferm's stock prioe was falling as profits rose Loren indicated that she had seen doouments desarbing the firm's profil-sharing plan under which all managers were partially compensated on the basis of the fim's profits. She suggested that maybe it was proft that was important to management, because R aedly affected ter pay Dale said. "That doesn't make sense, because the stokholders own to im. Shouldn't management do what's best for stockholders? Something's wrong" Loren responded, Well, maybe that explains why the company hasn't concemed Rself with the stock prios. Look, the only profits that stockholders receive are in the form of cash dividends, and this firm has never paid dividends duing ts 20-year history We as stockholders therefore don't directly benefit from profts. The only way we benefit is for the stock prce to rise. Dale chimed in, "That probably explains why the fim is being sued by state and federal environmental oficials for dumping pollutants in the adjacent stream Why spend money for pollution control? It increases costs, lowers profits, and therefore lowers managements cho D A break had ended and they must quicky retum to work. Before leaving, they decided to meet the next day to continue their discussion To De a. What should the management of Sports Products, Inc, pursue as its overriding goa? Why? b. Does the fim appear to have an agency problem? Explain. c. Evaluate the fiem's approach to poilution control Dges it seem to be ethical? Why might incuring the expense to control poilution be in the best intorests of the fem's owners espte its negative effect on profts d. Does the nmn appear to have an effective orporate governance stuctum? Explan any shrtomrg. e. On the basis of the infomation provided, what speoific recommendations would you offer the firm? O D. a. What should the management of Sports Products, Inc. pursue as ts overidng goa? hy? (Select at the choices that apply) e. On t DA. Maximization of share hoilder weath, which means maximization of share price, should be the D B. Unlke Some r primary goal of the firm proft maximization, maximization of shareholder weath considers trming. cash fows and risk It also reflects the worth of the owners investment in the fim at any time. It is the value they can realize should they decide to sell their shares C. Maximzation of the firm's profts, whidh means maximization of D. Unlke share price, should be the primary goal of the fem maximization of shareholder weath, maximzation of the fin's profts considers, cash flows, and risk It also neflects the worth of the owners investment in the 6im at any time. It is the value they can realze should they decide to sel ther shares b. Does the fim appear to have an agency problem? Explain. (Select at the choices that apply) DA. Yes. there appears to be an agency problem. Although compensation for management is ted to D. E profts, t is not directly linked to share price Managements actions with regard to polution controls suggest a proft maximization focus, which would maximize their earnings, rather than an aflempt to maximize share price No, there does not appear to be an agency problom Athough compensation for ed to profits, it is not drectly knked to share prce. C. D. Management's actions wih regard to pollution contbrols suggest a shareholders' wealth maximzaion focus, which would maximize their earnings, rather than an share price earnings, rather than an atempt to max mize c. Evatuate the trm's approach to poilution controt Does t seem to be ethical? Why might incurning the expense to contro poilution be in the best interests of the femi's owner apply) s despte its negative effect on profes? (Select all the choices that A. The fem's approach to polution control does not seem to be q ueshonable etfhicaly It is uhclear cBook