Question

Please give me the correct answer:

Jacobs Engineering Group had its target price increased by analysts at KeyCorp from $82.00 to $86.00 in a research note issued to investors on Wednesday, Benzinga Ratings Tables reports. The firm currently has an "overweight" rating on the construction company's stock. KeyCorp's price target indicates a potential upside of 7.69% from the company's current price. Other research analysts have also issued research reports about the company. MKM Partners lifted their price target on Jacobs Engineering Group to $87.00 and gave the stock a "buy" rating in a report on Tuesday, February 26th. ValuEngine upgraded Jacobs Engineering Group from a "hold" rating to a "buy" rating in a report on Monday, February 25th. Cowen set a $82.00 price objective on Jacobs Engineering Group and gave the stock a "buy" rating in a report on Wednesday, February 20th. Citigroup set a $83.00 price objective on Jacobs Engineering Group and gave the stock a "buy" rating in a report on Wednesday, February 20th. Finally, Robert W. Baird set a $83.00 price objective on Jacobs Engineering Group and gave the stock a "buy" rating in a report on Wednesday, February 20th. Two equities research analysts have rated the stock with a hold rating and fifteen have issued a buy rating to the company's stock. Jacobs Engineering Group has a consensus rating of "Buy" and a consensus target price of $84.55.

The case above reports that two of the equities research analysts have rated the stock with a “hold” rating. If the two equities research analysts are right, what results must have found about the value of Jacobs Engineering Group’s common stock?

1. Two equities research analysts found that the current market price of common stock for Jacobs Engineering Group is above the book value of Jacobs Engineering Group’s common stock.

2. Two equities research analysts found that the current market price of common stock for Jacobs Engineering Group is equal to the intrinsic value of Jacobs Engineering Group’s common stock.

3. Two equities research analysts found that the current book of common stock for Jacobs Engineering Group is above the intrinsic value of Jacobs Engineering Group’s common stock.

4. Two equities research analysts found that the intrinsic value of common stock for Jacobs Engineering Group is above to the current common stock price of Jacobs Engineering Group.

5. none of the answers is correct.

Benchmark, the Silicon Valley venture firm and early investor in Uber, has sued former CEO Travis Kalanick.

In a Delaware Chancery Court filing, originally identified by Axios’ Dan Primack, the suit alleges that Kalanick committed fraud, breach of contract and breach of fiduciary duty. Both Kalanick and Benchmark hold Uber board seats.

Accusing Kalanick of being “selfish” by packing Uber’s board with “loyal allies,” Benchmark alleges that the ousted CEO broke the law by trying to pave the way.

The board of directors and corporate managers work together and at times, because they know each other well, there could be an entrenchment among them. As the alleged claim is true CEO Travis Kalanick committed fraud, breach of contract and breach of fiduciary duty to benefit himself, what kind of problem in a corporation describes the situation the best?

1. managers benefiting themselves rather than the shareholders of the company is called “fiduciary problem.”

2. managers benefiting the shareholders of the company rather than themselves is called “corporate governance.”

3. managers benefiting the shareholders of the company rather than themselves is called “agency problem.”

4. none of the answers is correct.

5. managers benefiting themselves rather than the shareholders of the company is called “agency problem.”

Pomerantz LLP is investigating claims on behalf of investors of EQT Corporation (“EQT” or the “Company”). The investigation concerns whether EQT and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.
On June 19, 2017, EQT announced entry into an agreement to acquire Rice Energy Inc. (“Rice”) for total consideration of $6.7 billion (the “Acquisition”). EQT touted the purported benefits of the proposed merger, telling its shareholders that the Acquisition would result in $2.5 billion in synergies, including $100 million in cost savings in 2018 alone. On July 3, 2017, activist investor JANA Partners LLC (“JANA”), in several letters citing detailed evidence, asserted that the Rice merger synergies were “grossly exaggerated” and that according to JANA’s expert analysis, “it would be impossible for EQT to support its claimed synergy drilling plan.” Nonetheless, EQT repeatedly denied JANA’s assertions and reassured investors of the merits of the Acquisition. EQT and Rice shareholders thereafter approved the Acquisition. After the Acquisition closed in November 2017, EQT continued to tout the “significant operational synergies” or the merger that would purportedly allow EQT to become “one of the lowest-cost operators in the United States.” On March 15, 2018, just five months after the Acquisition closed, EQT announced the sudden and unexpected resignation of Steven T. Schlotterbeck as the Company’s Chief Executive Officer. Then, on October 25, 2018, EQT reported surprisingly bad third-quarter financial results caused by a significant increase in total costs, which were $586.2 million higher than in the same period of the prior year. Moreover, EQT disclosed that its estimated capital expenditures for well development in 2018 would increase by $300 million, to $2.5 billion, as a result of “inefficiencies from higher activity levels, the learning curve on ultra-long horizontal wells, and service cost increases.” As a result, EQT reduced its full-year forecast for 2018. These disclosures were at odds with EQT’s prior representations concerning the purported synergies of the Acquisition.
On this news, EQT’s stock price fell $2.79 per share, or 12.65%, to close at $19.24 per share on October 25, 2018.

Which one of the goals will be appropriate for Steven T. Schlotterbeck as the Company’s Chief Executive Officer to follow?

1. Shareholders wealth maximization.

2. Short-term profit maximization.

3. Sales and net income maximization.

4. Free cash flow maximization.

5. none of the answers is correct.

When Ultra Petroleum Corp. emerges from bankruptcy protection in the coming weeks, as expected, the natural gas producer's chief executive is on track to be rewarded with roughly $35 million worth of its stock, more than 10 times his annual compensation in recent years.

Michael Watford, the CEO, and other employees at the Houston company are sharing 7.5% of the Ultra's new shares, a fairly typical cut awarded to managers of companies emerging from bankruptcy protection to incentivize them to stick around. Bankrupt companies usually issue new stock when they emerge from bankruptcy, replacing their old shares.

What's unusual in Ultra's case is the size of the pie from which that slice is coming: The company's postbankruptcy equity value has been set at about $4 billion, meaning that its employees are due some $300 million of stock, 40% of it to be doled out the day its new shares are launched, according to court filings and people familiar with the matter. The rest would be distributed at the discretion of its board.

While Ultra Petroleum Corp. emerges from bankruptcy protection, Michael Watford, the CEO of the company, will be rewarded with roughly $35 million worth of its stock. Do you think this is consistent with the firm’s goal?

1. The amount of the award is outrageous, and it is inconsistent with the sales maximization goal.

2. none of the answers is correct.
3. There's more to Uber IPO flop than meets the eye: It’s clear now that Uber Technologies Inc’s initial public offering will be left with a less than five-star review. The stock remains below its IPO price, and many people have heaped fault on the bankers who told executives that Uber could be worth $120 billion.

4. Even though the amount awarded is outrageous, the incentivizing top managers with bonuses is consistent with the shareholders wealth maximization goal.

5. Even though the amount awarded is outrages, the incentivizing top managers with bonuses is consistent with the shareholders sales maximization goal.

6. The amount of the award is outrageous, and it is inconsistent with the shareholders wealth maximization goal.

Answer 1

First question:

The correct answer is option 2. Two equities research analysts found that the current market price of common stock for Jacobs Engineering Group is equal to the intrinsic value of Jacobs Engineering Group’s common stock.

The "HOLD"rating usually signals that the stock is sufficiently price and the market price is nearly equal to its intrinsic value. Hence, there is nearly no upside by investment. Hence, the HOLD rating.

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Second question:

The correct answer is the option 5. managers benefiting themselves rather than the shareholders of the company is called “agency problem.”

An agency problem commonly exists between the Shareholders and the managers, if the goals are not aligned.

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Third question

The correct answer is option 1. Shareholders wealth maximization.

This should be the primary goal of the CEO

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Fourth question

The correct answer is the last option: 4. Even though the amount awarded is outrageous, the incentivizing top managers with bonuses is consistent with the shareholders wealth maximization goal.