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WorldCom Agency Problem Case

WorldCom Agency Problem Case

Instructions:

Please read the case study first and then follow the steps to prepare your report. blankReport should include:

1. Cover page

2. A separate answer to each question: While answering the questions, present and analyze the findings (use examples/existing companies)

3. Reference: If you have other sources, please create a list of reference (Following APA style:

Format (Report):

4. Use Calibri or Arial font

5. Title should be in Bold.

6. Font Size: 12

7. Line spacing: maximum 1.5

8. Report should be from 350 to 500 words

Introduction

Agents may potentially misrepresent the firm and act in ways that favor their career rather than complying with the goal of the firm; that is maximizing the wealth of the stockholder, through maximizing the stock price. As a result, the company would face an Agency problem. Having said that it is important to highlight some of the agency problems that had occurred in the financial markets, one interesting and important incident is WorldCom scandal. blankIn this research case study, you should complete the following:

1. Research the reason behind the WorldCom Scandal. [20 pts]

2. How did this agency problem occur? [20 pts]

3. How did this agency problem affect the company?  [20 pts]

4. How did the owners react towards this incident? [20 pts]

5. In conclusion, mention the different solutions that the owners might implement to solve the agency problem, in general [20 pts]

Bonus Question :(5 Points) 

1. Company D has issued bonds that have 15% coupon rate, payable annually. The bonds mature in 5 years, have a face value of 2100$, and YTM of 10%. What is the price of the bonds? (5 points)

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