Question 2 a) Corporate Governance i. What is the difference between ownership and control? Why do differences between the two matter? (4 marks) ii. Suppose you are considering renting an apartment. You, the renter, can be viewed as an agent while the company that owns the apartment can be viewed as the principal. What principal-agent conflicts do you anticipate? (3 Marks) iii. Suppose, instead, that you work for the apartment company. What features would you put into the lease agreement that would give the renter incentives to take good care of the apartment? (3 Marks) b) Annuity Other Types iv You work for Goodhealth Pharmaceutical Company Limited that has developed a new anti-viral drug. The patent on the drug will last for 17 years. Your company expect that the drug will produce cash flows of Ghc10 million in its first year and that this amount will grow at a rate of 4% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce generic equivalents of your drug and competition will drive any future profits to zero. If the interest rate is 19% per year, estimate the present value of producing the new anti-viral drug. (5 Marks) iiv You are running a delivery company in the major cities of Ghana. Analysts predict that the companys earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of Ghc5,000,000. What is the present value of all future earnings if the interest rate is 8%? (Assume all cash flows occur at the end of the year.) (5 Marks)