Question 4 Agency Theory Rejectus Limited is a corporate group historically in operating in the retail industry, but recently having diversified into casinos and tourism. Its CEO, as well as chief decision makers of its various divisions, are rewarded with a mixture of short-term and long-term compensation. In addition to fixed salaries, members of upper management are rewarded with bonuses from a pool consisting of 5% of the total profit of the company. Of these bonuses, half are paid in cash and half are allocated as restricted Rejectus shares. Twenty percent of the awarded shares become free to sell by the employee in the year of award and in each of the ensuing four years. The company has recently sold out of the DwarfPlanet Casino Corporation (DCC) complex after substantial losses there due to allegations that the DCC has been laundering funds for organised crime. As a result, most of Rejectus's top management left last year, and new management has been appointed to consolidate operations. As a result, the Board has agreed that it will sell or restructure its operations, particularly its badly performing subsidiary SustainableMiningCorp Ltd (SMC), as well as its BlueSky Antigravity (BSA) research and development subsidiary. This restructuring activity is likely to take two to five years. Each of these subsidiaries has substantial depreciating assets which are almost certainly impaired. Moreover, BSA is being sued by the spouse of one of its researchers, who died in a tragic accident while testing its latest Jump-to- work" anti-gravity device. It is very likely that the case will be lost, but not judgement has yet been issued in the case. The Rejectus group also controls the wholly owned subsidiary WarStuff Ltd, which was purchased in 1968 and has all of its assets carried at cost. WarStuff sells army surplus equipment and is the one jewel in Rejectus's portfolio, being consistently very profitable. All Property, Plant and Equipment held by WarStuff is recorded at cost, including land and buildings that were purchased in the 1960s