Assossing tho Goal of Sports Produats, Inc. Loen Seguars and Dale Johnson both work for Sports Products, Inc. major producer of boating equipment and accsssories.Loen works as a clericalant in the Accouning Deparment and Dale woks as a packager in the Shipping DepartmentDuring their lunch break one day they began talking about the company Dale compliained that he had always worked hard tryling not to waste paciking materials and eEidently and cost-effecively performing his job. Iin spite of his efforts and those of his co-workers in the department, the rem'stock price had declned neaity $2.00 per share over the past 9 months Loren indicated that she shared Dale's frustration, partoularly becase the finn's proftshad been .keer could undertand why the firm's stock price was faling asprota naa Loren indicated that she had seen doouments desorbing the irm's profit-sharing plan under which all managers wene partialy compensated on the basis of the m's prolits She suggested that maybe it was proft that was important to management, because it diredty aflected their pay, Dale said, That doesn't make sense, because the stocholders own the finn Shoulint management do whath best for stockholders? Sorweings wrogr Lien responded, .. maybe tat explains why the company hasnt concemed Itself with the stock proe Look, the only profits that stockholders receive are in the form of cash dividends, and this fem has never paid dividends duing ts 20-year history We as slockholders therefoe don't directly benefit from profts. The only way we beneit is for the stock price to rise."Dale dhimed in, That probably explains why the 8im 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 prollts, and therefore lowers management's d. ch Loren and Dale realized that the lunch break had ended and they must quickly retum to work. Before leaving, hey dedided to meet the next day to continue their discussion To Do a. What should the management of Sports Products, Inc., pursue as its overriding goar? Why b. Does the fim appear to have an agency problem? Explain e. Evaluate Phe fm's approach to pollution control Does E seem to be ethical7 Why might incuning the expense to control pollution be in the best interests of the irm's owners despite its negative effect on profts? d. Does the 6im appear to have an effective corporate governance structure? Explain any shortoomings e. On the basis of the information provided, what speoific recommendations would you offer the fm What should the management of Sports Products, linc. pursue as ts overriding goal? Why? (Select all the dholces that A. Maximization of share holder weath which means maximization of share price, should be the B.Unlke proft maximization maximization of shareholder weath considers timing, cash fows and C. Maximization of the firm's proits which means maximization of share price, should be the primary D. Untke maximization of shareholder wealth, maximization of the fim's profts considers,cash apply) So primary goal of the frm risk it aso refects the worth of the oanens investment in the fim at any time. It s the vakue they Di can malze should they dedide to sell their shares goal of the firm. ows, and risk. R aso eflects the worth of the owners' investment in Phe 5im at any time. It is the value they can reaize should they decide to sell their shares b. Does the fim appear to have an agenoy problem? Explain (Select alt the choices that apply) A Yes, there appears to be an agency problem. Although compensation for management is ted to B. Managements actions with regard to pollution contols suggest a proft maximization focus, whidh C. No, Phere does not appear to be an agency problem Athough compensation for management is D. Management's actions with regard to polution controls suggest a shareholders" weat profes, t is not dredtly Iinked to share price would maxie heir earnings, rather than an attempt to maximize share prce tied to profts, it is not directly Inked to share price maximaation focus which would maxmize heir earnings, rather tan an attempt to aximize share prce c. Evaluate the fem's approach to polution control Does t seem to be ethical? Why might incuring the expense to control polution be in the best interests of the frm's owners despite its negative efflect on profes? (Selet al the choices that apply) A The frm's approach to polution control does not see m to be questonable ethicaly it is unchar MacBook