ACCY-05-Sky-Air-答案

ACCY302GroupActivity#1Page1of4SkyAirActivitySection:_____GroupNumber:_____Groupmembernames:(donotincludenamesofanyoneabsent)________________________________________________________________________________________________________________________________________________________________Thepurposesofthisactivityareto:giveyouachancetointeractwithmembersofyourgroupasyouwillbeforlaterassignments(albeitinanabbreviatedtime);compareyouranalysisoftheSkyAircasetothoseofyourgroupmembersandironoutanydifferences;and,doanoutlineofacaseanalysismemoandreceivefeedbackontheideasyouincorporateinit.Discusseachofthefollowingquestionswithyourgroupmembers,andwriteyourconsensusanswersinthespaceprovided(youcanusebulletpoints,butwritelegibly).Handinoneassignmentpergroup.Eachmemberofyourgroupwhoisinclasswillreceivethesamenumberofpointsoutofthetotalpossible.Youmustincludeacomputationfortheadditionalanalysisofthepossibleairplanepurchasethatisincludedinthecaseassignment(includecomputationsonthelastpageofthishandout)andusethatanalysistosupportoneormoreofthepointsraisedinyourresponses.1)Describethecurrentandfutureprincipal-agentrelationshipsforSkyAir,Inc.,andwhatimplicationsachangeinthoserelationshipshasforKaplan’smotivationandbehavior.CurrentlySkyAirisownedbyKaplan’sfamily,sotheKaplans(SamuelKaplan,hiswifeandhiscousinBob)areshareholders–theprincipals,Kaplanisalsothemanager-theagent.ItseemsthatKaplan’sfamilyentrustsKaplantomanagethecompany.But,theprincipal-agentrelationshipisn’tactuallyclear,whichmeanstheprincipalhimselftooperatethecompany.Theprincipalandtheagenthavethesamegoalsandcommoninterests..Afterselling30percentequitystaketoThyesteanVentures,KaplanandThyesteanVentureswillbeprincipals,andKaplanwillstillbethemanager,astheagent,butdifferentfrombefore.AsthesoleownerofSkyAir,Kaplantendstotakeinputandoutputintoconsideration.Hisgoalistomanagetominimizetheinputformaximizedoutput.Heonlyweighsthecostandbenefit.Whencompanyisfacedwithdecisionmaking,Kaplanconsiderscompanypriortohimself,hewillchoosetheprogramswhichincreasethevalueofthecompany.However,afterthechangeinprincipal-agentrelationship,hemayattachmoreimportancetohisowninterestasamanager.BecauseThyesteanVenturesbecometheshareholder,sharingtheriskbuttheprofit.Afterall,heisstilltheownerofthecompany,hecaresthewholecompany,buthecan’tgainthe100percentoftheprofit.Sohewantscompensationsfrombeingamanager.Forthen,costandbenefitisn’ttheonlyfactorinfluencinghisdecision.Hethinksaboutwhetherthesalaryasamanagercanoffsetthelossofthe30percentofequitystakeornot.Therefore,hecouldmakeadverseselectionssuchaslowNPVprojectbenefitmanagersbutmaynottheshareholders.ACCY302GroupActivity#1Page2of42)ExplainwhyThyestean’sofferismuchlowerthanKaplan’sestimate.Tobemorespecific,weuseperpetualannuitymethodtoillustratethedifferencebetweenKaplanandThyesteanVentures.Theformulais:PV=D/(1+r)+D(1+g)/(1+r)^2….=D/(r-g)D:annuityr:theexpectationofReturnonEquityg:annualgrowthrateFinally,wegettheresult:theexpectationofReturnonEquityforThyesteanVenturesis46%,buttheexpectationofReturnonEquityforSamuelKaplanis40.5%.ForThyestean,itfindsthatinrecentfouryears,theprofitabilitygrowthhadslowedandevendeclinedslightlyin1993and1996.Itfindsthisinvestmenthasalittlereturnandlackofpotential.Thereforeitsofferingpriceismuchlower.Theunderestimationisduetotheinformationasymmetry.Itlacksunderstandingonthecompany’sprospectandKaplan’scapacity,presuminglittleornogrowth.However,Kaplanseestheslowingrevenuegrowthasatemporarysituation.heisconfidentthatthecashflowwouldcontinuetogrowatitshistoricalrateinthefuture.Soheistoooptimisticabouttheindustryforegroundandhasintimateknowledgeofmarketcircumstance.That’swhyhisvaluationishigher.Aboveall,Thedifferencecomesfromfollowing2aspects1.Thedifferencesbetweentheirdemandedratesofreturn.Theperspectivesaboutthefutureprofitabilityleadtodifferentdemandedratesofreturn.2.Informationasymmetry.3.BothofthemareREMMers,theywanttomaximizetheirbenefit.4.Themodelweuseaboveisonlyonepossiblemethod,eventhesamewaytocalculatecausebigdifferencenottomentiondifferentmethods.TheymayusetotallydifferenttoolstoevaluatethevalueofSkyAirACCY302GroupActivity#1Page3of43)WhatdoyourecommendthatKaplandotoreducethevaluationdifference?Bespecific.1.ProvidemoreintimatedetailsaboutSkyAirtomakeThyesteanunderstandthepotentialandgoodprofitabilityofSkyAir.2.ShowingthefutureplantoThyestean,convincingitSkyAirhasabrightfuture.3.TomakeThyesteanofferhigherprice,hecanusesomelegalmeanstomakebookvalueofassetsseemtobehigherormentionmoreadvantages.4.KaplancancompromisetooffermorestakestoThyesteanwhenthepricehegivenisstill20millionorlower.Thisofferingisabletodoaprobableadjustmentbetweenthem.Inthissituation,Thyesteancanforecastmuchmorelong-termprofits,whichwillcontributetotheconcession.ACCY302GroupActivity#1Page4of4AdditionalAnalysis(includeanexhibitshowingthesecalculationsandrefertothisanalysisasanexampleofwhytheremightbevaluationdifferencesbetweenKaplanandThyestean):SupposeKaplan(asthesoleownerofSkyAir)isconsideringthepurchaseofacompanyjetforexecutiveratherthanforcommercialu