Problem 2 For each of the following actions, state where they are not an agency costs or not and explain why? (8 mariks) (a) Management foregoing an investment opportunity which would add to the market value of the owner's equity. (b) The company paying a dividend to each of the existing shareholders. (c) The company purchasing new equipment which increases the value of each share of stock. (d) The company hiring outside auditors to verify the accuracy of the company financial statements. Problem 3 You are choosing between two investments of equal risk. You believe that given the risk, the appropriate discount rate to use is 9%. Your initial investment (outflow) for each is $6,000. The first investment is expected to pay out $10,000 three years from now; the second investment is expected to pay out $13,500 five years from now. (a) Which investment should you chose and why? Show calculations. (8 marks) (b) You are choosing between the same two investments, but you have reassessed their risks. You now consider the five-year investment to be more risky than the first and estimate that a 15% return (discount rate) is required to justify making this investment. The first investment remains a 9\%. Which investment should you choose and why? Show calculations. ( 5 marks)