PLEASE HELPPP

Assessing the Goal of Sports Products, Inc. Loren Seguara and Dale Johnson both work for Sports Products, inc, a major producer of boating equipment and accessories Loren works as a clerical assistant in the Accounting Departmont, and Dale works as a packager in the Shipping Department. During their lunch break one day, they began talking about the company Dale complained that he had always worked hard trying not to waste packing materials and efficiently and cost-effectively perlorming his job. In spite of his eflorts and those of his co-workers in the department, the firm's stock price had declined nearly $2.00 per share over the past 9 months. Loren indicated that stse shared Dale's frustration, particularly because the firm's profits had been rising Neither could understand why the firm's stock prico was faling as profits rose. Loren indicated that she had seen documents describing the firm's profit sharing plan under which all managers were partially compensated on the basis of the firmis profits. She suggested that maybe it was profit that was important to management, because it directly affected their pay. Dale said. That doesn't make sense. because the stockholders own the firm. Shouldn't management do what's best for stockholders? Sornething's wrongl' Loren responded, Well, maybe that explains why the company hasn't concerned itself with the stock price. Look, the only profits that stockholders receive are in the form of cash dividends, and this firm has never paid ovidends during its 20 yoar history. We as stockholders therefore don't directly beneft from profits. The only way we benefit is lor the stock price to rise. "Dale chimed in. That probably explains why the firm is being sued by state and federal environmental officials for dumping poilutants in the adjacent stream. Why spend money for pollution contrei? il increases costs, lowers profits, and therefore lowers management's earningst" Loren and Dale realized that the funch break had ended and they must quickly retum to work. Before leaving, they decided to meet the next day to continuo thoir discussion. To Do a. What should the management of Sports Products, inc, pursue as its overriding goar? Why? (Select al the choices that apply) A. Maximization of shareholder wealth, which means maximization of share price should be the primary poat of the firm B. Unlike profit maximization, maximization of sharehoider weath considers tening cash flows and isk it also robects the wonth of the owners investment in the firm at any time. It is the value they can roalee should they decide to sell their shares C. Maximization of the firmis profits, which means maximization of share price, should be the primary goal of ene firm D. Unike maximization of sharebolder wealth, maximization of the firm's profis conaiders, cash fows, and risk it also reflects the worth of the omers investment n the firm at any time. If is the value thery can realize should they decide to sell their thares To Do a. What should the management of Sports Products, lnc, pursue as its overriding goal? Why? b. Does the firm appear to have an agency problem? Explain. c. Evaluate the firm's approach to pollution control Does it seem to be ethical? Why might incurring the expense to control pollution be in the best interesta of the firmis owners despite its negative effect on profits? d. Does the firm appear to have an effective corporate governance structute? Explain any shortcomings e. On the basis of the information provided, what specific recommendations would you offer the firm? a. What should the management of Sports Products, Inc, pursue as its overriding goal? Why? (Select all the choices that apply) A. Maximization of shereholder wealth, which means maximization of share price, should bo the primary goal of the firm B. Unike profe maximization, maximization of shareholder wealth considers timing cash flows, ond tisk it also refects the worth of the owners investment in the firm at any time. It is the value they can realize should they decide to sel their shares C. Maximization of the firm's profits, which moans maximization of shace price, should bo the primary goal of the firm D. Unlike maximization of shareholder wealth, maximization of the firm's protits considers, cash flows, and risk. It atso reflects the worth of the owners' investment in the fem at any time it is the value they can realize should they decide to sel their shares