I1

The president of Nelson International made this statement in the company's annual report: "Nelson's primary goal is to increase the value of common stockholders' equity over time." Later in the report, the following announcements were made: a. The company contributed $2 million to the symphony orchestra in Seattle, its headquarters city. b. The company is spending $600 million to open a new plant in Venezuela. No revenues will be produced by the plant for 4 years, so earnings will be depressed during this period versus what they would have been had the decision not been made to open the new plant. Discuss if you think each of these actions is consistent with Nelson's stated goal of increasing the value of common equity. (5 points each)