a. What are agency costs? Why do these tend to increase in severity, as a company...

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Finance

a. What are agency costs? Why do these tend to increase inseverity, as a company grows larger?
b. Think back to the last time you ate at an expensiverestaurant where you paid the bill. Now think about the last timeyou ate at a similar restaurant, but your parents paid the bill.Did you order more food (or more expensive food) when your parentspaid? Explain how this relates to the agency problem incorporations.
c. You are the CEO of a company and you are considering enteringinto an agreement to have your company buy another company. Youthink the price might be too high, but you will be the CEO of thecombined, much larger company. You know that when the company getsbigger, your pay and prestige will increase. What is the nature ofthe agency conflict here, and how is it related to ethicalconsiderations?

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a Agency cost is the cost that is incurred by the company due to agency conflict The agency conflict arises due to the difference between the principal and the agent The principal assigns some work and responsibilities to the agent The agent may or may not follow the instructions of the principal This will lead to difference of opinion and conflict The See Answer

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a. What are agency costs? Why do these tend to increase inseverity, as a company grows larger?b. Think back to the last time you ate at an expensiverestaurant where you paid the bill. Now think about the last timeyou ate at a similar restaurant, but your parents paid the bill.Did you order more food (or more expensive food) when your parentspaid? Explain how this relates to the agency problem incorporations.c. You are the CEO of a company and you are considering enteringinto an agreement to have your company buy another company. Youthink the price might be too high, but you will be the CEO of thecombined, much larger company. You know that when the company getsbigger, your pay and prestige will increase. What is the nature ofthe agency conflict here, and how is it related to ethicalconsiderations?