Computation Question 4: (8 pts) NBA Corp. is all equity financed. Its managers are currently engaging in some self- serving activities, such as taking significant time off playing golf, using corporate funds to purchase super-bowl tickets, and flying corporate jets for family trips. Shareholder monitoring can curb these activities. Suppose that whoever performs the monitoring will incur a lump sum cost of $400,000. As a result of the monitoring, managerial misbehavior will be reduced and firm value will increase instantly by $10 million. a. Will a shareholder who owns 0.1% of the company have the incentive to monitor the managers, and why? (Show the computation) b. Will a shareholder who owns 5% of the company have the incentive to monitor the managers, and why? (Show the computation) c. What is the minimum percentage ownership for a shareholder to have the incentive to monitor the managers? (Show the computation) d. What inference can you draw from this question about the incentives of shareholders to monitor managers? Computation Question 4: (8 pts) NBA Corp. is all equity financed. Its managers are currently engaging in some self- serving activities, such as taking significant time off playing golf, using corporate funds to purchase super-bowl tickets, and flying corporate jets for family trips. Shareholder monitoring can curb these activities. Suppose that whoever performs the monitoring will incur a lump sum cost of $400,000. As a result of the monitoring, managerial misbehavior will be reduced and firm value will increase instantly by $10 million. a. Will a shareholder who owns 0.1% of the company have the incentive to monitor the managers, and why? (Show the computation) b. Will a shareholder who owns 5% of the company have the incentive to monitor the managers, and why? (Show the computation) c. What is the minimum percentage ownership for a shareholder to have the incentive to monitor the managers? (Show the computation) d. What inference can you draw from this question about the incentives of shareholders to monitor managers