Subject: Corporate Finance $($MBA $605)$

Chapter $1$: The Corporation

Exercise: $1$

Date: $\frac{21}{01}\frac{?}{2024}$

Name of student:Sora Dokhi albogami

Registration Number of student: $202318022$

Question $1$: What are the main advantages and disadvantages of organizing a firm as a corporation? What does the phrase limited liability mean in a corporate context?

Question $2$: You are a shareholder in a C corporation. The corporation earns $$2$ per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is $40\%$ and the personal tax rate on $($both dividend and nondividend$)$ income is $30\%.$ How much is left for you after all taxes are paid?

Question $2$: Corporate managers work for the owners of the corporation. Consequently, they should make decisions that are in the interests of the owners, rather than their own. What strategies are available to shareholders to help ensure that managers are motivated to act this way?

Question $3$: You have decided to form a new start$-$up company developing applications for the iPhone. Following are some of the examples of financial decisions you will need to make. Give at least two more examples of financial decisions you will need to make.

As the manager of an iPhone applications developer, you will make three types of financial decisions.

i$.$ You will make investment decisions such as determining whic: type of iPhone application projects will offer your company a positive NPV and that your company, therefore, should develop.

ii$.$ You will make the decision on how to fund your iPhone application investments and what mix of debt and equity your company will have.

iii. You will be responsible for the cash management of your company, ensuring that your company has the necessary funds to make investments, pay interest on loans, and pay your employees.