Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders

Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders

4.             Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders?

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a.     Decrease the use of restrictive covenants in bond agreements.

b.     Take actions that reduce the possibility of a hostile takeover.

c.     Elect a board of directors that allows managers greater freedom of action.

d.     Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries.

e.     Eliminate a requirement that members of the board of directors have a substantial investment in the firm’s stock.

 

5.             If the projected net earnings is $5m and the dividend payout ratio is 60%, what is the projected retained earnings at the end of the next year if the retained earnings at the end of this year is $10m?

a.    $6m

b.    $9m

c.    $10m

d.    $11m

e.    $12m

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