SOLUTION MANUAL FOR n n
Entrepreneurial Finance, 7th Edition J. Chris Leach (Author),
n n n n n n n
Ronald W. Melicher (Author)
n n n n
Chapter 1-16 With Cases Products &Spatial Tech
n n n n n n
n Chapter 1 n
INTRODUCTION nTO nFINANCE nFOR nENTREPRENEURS
n FOCUS
The npurpose nof nthis nfirst nchapter nis nto npresent nan noverview nof nwhat nentrepreneurial nfinance nis
nabout. n In ndoing nso nwe nhope nto nconvey nto n you nthe nimportance nof nunderstanding nand napplying
nentrepreneurial nfinance nmethods nand ntools nto nhelp nensure nan nentrepreneurial nventure nis
nsuccessful. nWe npresent na nlife ncycle napproach nto nthe nteaching nof nentrepreneurial nfinance nwhere
nwe ncover nventure noperating nand nfinancial ndecisions nfaced nby nthe nentrepreneur nas na nventure
nprogresses nfrom nan nidea nthrough nto nharvesting nthe nventure.
LEARNING nOBJECTIVES
LO n1.1: nCharacterize nthe nentrepreneurial nprocess.
LO n1.2: nDescribe nentrepreneurship nand nsome ncharacteristics nof nentrepreneurs.
LO n1.3: nIndicate nseveral nmegatrends nproviding nwaves nof nentrepreneurial nopportunities.
nLO n1.4: nList nand ndescribe nthe nseven nprinciples nof nentrepreneurial nfinance.
LO n1.5: nDiscuss nentrepreneurial nfinance nand nthe nrole nof nthe nfinancial nmanager.
nLO n1.6: nDescribe nthe nvarious nstages nof na nsuccessful nventure‘s nlife ncycle.
LO n1.7: nIdentify, nby nlife ncycle nstage, nthe nrelevant ntypes nof nfinancing nand ninvestors.
nLO n1.8: nUnderstand nthe nlife ncycle napproach nused nin nthis nbook.
CHAPTER nOUTLINE
1.1 THE nENTREPRENEURIAL nPROCESS
1.2 ENTREPRENEURSHIP nFUNDAMENTALS
A. Who nis nan nEntrepreneur?
B. Basic nDefinitions
C. Entrepreneurial nTraits nor nCharacteristics
D. Opportunities nExist nBut nNot nWithout nRisks
1.3 SOURCES nOF nENTREPRENEURIAL nOPPORTUNITIES
A. Societal nChanges
B. Demographic nChanges
C. Technological nChanges
D. Emerging nEconomies nand nGlobal nChanges
E. Crises nand n―Bubbles‖
F. Disruptive nInnovation
1
,2 Chapter n6: nManaging nCash
Flow
1.4 PRINCIPLES nOF nENTREPRENEURIAL nFINANCE
A. Real, nHuman, nand nFinancial nCapital nmust nbe nRented nfrom nOwners n(Principle n#1)
B. Risk nand nExpected nReward ngo nHand nin nHand n(Principle n#2)
C. While nAccounting nis nthe nLanguage nof nBusiness, nCash nis nthe nCurrency n(Principle n#3)
D. New nVenture nFinancing nInvolves nSearch, nNegotiation, nand nPrivacy n(Principle n#4)
E. A nVenture‘s nFinancial nObjective nis nto nIncrease nValue n(Principle n#5)
F. It nis nDangerous nto nAssume nthat nPeople nAct nAgainst nTheir nOwn nSelf-
Interests n(Principle n#6)
G. Venture nCharacter nand nReputation ncan nbe nAssets nor nLiabilities n(Principle n#7)
1.5 ROLE nOF nENTREPRENEURIAL nFINANCE
1.6 THE nSUCCESSFUL nVENTURE nLIFE nCYCLE
A. Development nStage
B. Startup nStage
C. Survival nStage
D. Rapid-Growth nStage
E. Early-Maturity nStage
F. Life nCycle nStages nand nthe nEntrepreneurial nProcess
1.7 FINANCING nTHROUGH nTHE nVENTURE nLIFE nCYCLE
A. Seed nFinancing
B. Startup nFinancing
C. First-Round nFinancing
D. Second-Round nFinancing
E. Mezzanine nFinancing
F. Liquidity-Stage nFinancing
G. Seasoned nFinancing
1.8 LIFE nCYCLE nAPPROACH nFOR nTEACHING nENTREPRENEURIAL
nFINANCE nSUMMARY
DISCUSSION nQUESTIONS nAND nANSWERS
1. What nis nthe nentrepreneurial nprocess?
The nentrepreneurial nprocess ncomprises: ndeveloping nopportunities, ngathering nresources, nand
nmanaging nand nbuilding noperations nwith nthe ngoal nof ncreating nvalue.
2. What nis nentrepreneurship? n What nare nsome nbasic ncharacteristics nof nentrepreneurs?
Entrepreneurship nis nthe nprocess nof nchanging nideas ninto ncommercial nopportunities nand
ncreating nvalue. n While nthere nis nno nprototypical nentrepreneur, nmany nare ngood nat
nrecognizing ncommercial nopportunities, ntend nto nbe noptimistic, nand nenvision na nplan nfor nthe
nfuture.
3. Why ndo nbusinesses nclose nor ncease noperating? n What nare nthe nprimary nreasons nwhy
nbusinesses nfail?
, Chapter n6: nManaging nCash 3
Flow
Nearly none-half nof nbusinesses nthat nfail ndo nso nbecause nof neconomic nfactors nincluding
ninadequate nsales, ninsufficient nprofits, nand nindustry nweakness. nMany nof nthe neconomic nfactors
nare ndirectly ntied nto nfinancing nconcerns n(e.g., ninsufficient nprofits nfor ninvestors). n Almost n40
npercent nof nbusiness nfailures nnot nciting neconomic nfactors ncite nspecifically nfinancial ncauses
nlike nexcessive ndebt nand ninsufficient nfinancial ncapital. n The nremaining ncited nreasons nfor
nfailure ninclude na nlack nof nbusiness nand nmanagerial nexperience, nbusiness nconflicts, nfamily
nproblems, nfraud, nand ndisasters. n Many nbusinesses nclose nand nfail ndue nto nfinancial ntrouble
nwhich nis nmostly nrelated nto nlack nof nsales nand nunsatisfactory nprofits.
4. What nare nfive nmegatrend nsources nor ncategories nfor nfinding nentrepreneurial nopportunities?
We nidentify nfive nmegatrend ncategories. n They nare: n(1) nsocietal nchanges, n(2)
ndemographic nchanges, n(3) ntechnological nchanges, n(4) nemerging neconomies nand nglobal
nchanges, nand n(5) ncrises nand nbubbles.
Under nsocietal nchanges nwe ndiscuss nthe ngig neconomy nand nthe nsharing neconomy. n The ngig
neconomy nis nwhere nindividuals naccept nshort-term njob nassignments nor n―gigs‖ ninstead nof
nhaving nfull-time nemployment. n The nsharing neconomy nis nwhere nindividuals nshare ntheir
nassets, nsuch nas nhomes, nvehicles, nand npersonal ntime, nwith nothers nto nprovide na nnew nway nfor
ndistributing ngoods nand nservices.
5. What nasset nand nfinancial nbubbles nhave noccurred nrecently? n How ncan nbubbles nand
nfinancial ncrises nlead nto nentrepreneurial nopportunities?
The n―dot.com‖ nor nInternet nbubble nburst nin n2000. n An neconomic nrecession nthat nbegan nin
n2001 nwas nexacerbated nby nthe n9/11 nterrorist nattack. n The nhousing nasset nbubble, nfueled nby
nsub-prime nmortgages noffered nto nborrowers nwho ncould nnot nafford nthem, nburst nin n2006. n By
nthe nsecond nhalf nof n2008, na n―perfect nfinancial nstorm‖ nerupted nand npossible nfinancial
ncollapse nbecame na nreality.
Alternative nand nrenewable nenergy, naccompanied nby nproject ncredit nsubsidies, nproduction nand
ninvestment ntax ncredits, nand nloan nguarantees nbenefited nas na nresult nof nthe nrecent nfinancial ncrisis.
nThese ndevelopments nand nother nefforts nto nstimulate neconomic nactivity nprovided nmany nnew
nentrepreneurial nopportunities.
6. What nis ne-commerce? n Why nare nthe nInternet neconomy nand ne-commerce nhere nto nstay?
E-commerce ninvolves nthe nuse nof nelectronic nmeans nto nconduct nbusiness nonline.
n Activities ninclude nmarketing nand nselling nonline nand nelectronic nretailing.
The ninternet neconomy nand ne-commerce nare nhere nto nstay. n We nwill nnever ndo nbusiness nthe
nsame nway nwe ndid nbefore nthe nInternet nand nthe nWeb. n Many nbusiness nplans nwere nfunded nwith
nthe nbelief nthat npart nof nthe nbenefit ncould nbe ncaptured nby nsellers n(producers nand nretailers).
However, nwe nnow nknow nthat nthe nWeb nso neffectively nfacilitates nprice ncompetition nthat nit nis
nhard nfor nsuppliers nand nretailers nto nprotect nmargins. n E-commerce nmay nnot ndeliver nthe
nmargins nonce nconjectured, nbut nthe nInternet nis nstill none nof nthe nmost nradical ninnovations nin
nour nlifetime.
, 4 Chapter n6: nManaging nCash
Flow
7. What nis nmeant nby ndisruptive ninnovation? n What nis nthe n―sharing neconomy‖ nsocietal ntrend?
An ninnovation ninvolves nthe nintroduction nof na nnew nidea, nproduct, nor nprocess. n A ndisruptive
ninnovation nis nan ninnovation nthat ncreates na nnew nmarket nor nnetwork nthat ndisrupts nand
ndisplaces nan nexisting nmarket nor nnetwork.
8. Identify nthe nseven nprinciples nof nentrepreneurial nfinance.
The nseven nprinciples nare:
(1) Real, nhuman, nand nfinancial ncapital nmust nbe nrented nfrom nowners
(2) Risk nand nexpected nreward ngo nhand nin nhand
(3) While naccounting nis nthe nlanguage nof nbusiness, ncash nis nthe ncurrency
(4) New nventure nfinancing ninvolves nsearch, nnegotiation, nand nprivacy
(5) A nventure‘s nfinancial nobjective nis nto nincrease nvalue
(6) It nis ndangerous nto nassume nthat npeople nact nagainst ntheir nown nself-interests
(7) Venture ncharacter nand nreputation ncan nbe nassets nor nliabilities
9. Explain nthe nstatement: n ―The ntime nvalue nof nmoney nis nnot nthe nonly ncost ninvolved nin
nrenting nsomeone’s nfinancial ncapital.‖
The ntotal ncost nof nrenting nsomeone‘s nfinancial ncapital nis ntypically nsignificantly nhigher nthan
njust nthe ntime nvalue nof nmoney ndue nto nthe npossibility nthat nthe nventure nwon‘t nbe nable nto npay.
n The nrent nis nrisky nor nuncertain nrequiring nan nexpected ncompensation nin naddition nto nthe ntime
nvalue nof nmoney nfor nthe nrenting nagreement nto nbe nput nin nplace.
10. How ndo npublic nand nprivate nfinancial nmarkets ndiffer?
Public nfinancial nmarkets nare nmarkets nwhere nstandardized ncontracts nor nsecurities nare
ntraded non norganized nsecurities nexchanges. n Private nfinancial nmarkets nare nmarkets nwhere
ncustomized ncontracts nor nsecurities nare nnegotiated, ncreated, nand nheld nwith nrestrictions non
nhow nthey ncan nbe ntransferred.
11. What nis nthe nfinancial ngoal nof nthe nentrepreneurial nventure? n What nare nthe nmajor
ncomponents nfor nestimating nvalue?
The nventure‘s nfinancial ngoal nis nto nmaximize nthe nvalue nof nthe nventure nto nits nowner(s). n The
nmajor ncomponents nof nestimating nvalue nare nprojected nfree ncash nflow n(cash ngenerated nin na
nspecified ntime nperiod nthat nexceeds nfunds nneeded nto noperate, npay ncreditors, nand ninvest nin nthe
nassets nneeded nto ngrow nthe nventure) nand nits nrisk n(including nthe ntiming nand nrealized namount).
12. From nan nagency nrelationship nstandpoint, ndescribe nthe npossible ntypes nof nproblems nor
nconflicts nof ninterest nthat ncould ninhibit nmaximizing na nventure’s nvalue.
There nare ntwo nbasic ntypes nof nconflicts. n Owner-manager n(agency) nconflicts noccur nwhen
nthere nare ndifferences nbetween nmanagers‘ nself-interests nand nthe ninterests nof nthe nowners nwho
nhired nthe
Entrepreneurial Finance, 7th Edition J. Chris Leach (Author),
n n n n n n n
Ronald W. Melicher (Author)
n n n n
Chapter 1-16 With Cases Products &Spatial Tech
n n n n n n
n Chapter 1 n
INTRODUCTION nTO nFINANCE nFOR nENTREPRENEURS
n FOCUS
The npurpose nof nthis nfirst nchapter nis nto npresent nan noverview nof nwhat nentrepreneurial nfinance nis
nabout. n In ndoing nso nwe nhope nto nconvey nto n you nthe nimportance nof nunderstanding nand napplying
nentrepreneurial nfinance nmethods nand ntools nto nhelp nensure nan nentrepreneurial nventure nis
nsuccessful. nWe npresent na nlife ncycle napproach nto nthe nteaching nof nentrepreneurial nfinance nwhere
nwe ncover nventure noperating nand nfinancial ndecisions nfaced nby nthe nentrepreneur nas na nventure
nprogresses nfrom nan nidea nthrough nto nharvesting nthe nventure.
LEARNING nOBJECTIVES
LO n1.1: nCharacterize nthe nentrepreneurial nprocess.
LO n1.2: nDescribe nentrepreneurship nand nsome ncharacteristics nof nentrepreneurs.
LO n1.3: nIndicate nseveral nmegatrends nproviding nwaves nof nentrepreneurial nopportunities.
nLO n1.4: nList nand ndescribe nthe nseven nprinciples nof nentrepreneurial nfinance.
LO n1.5: nDiscuss nentrepreneurial nfinance nand nthe nrole nof nthe nfinancial nmanager.
nLO n1.6: nDescribe nthe nvarious nstages nof na nsuccessful nventure‘s nlife ncycle.
LO n1.7: nIdentify, nby nlife ncycle nstage, nthe nrelevant ntypes nof nfinancing nand ninvestors.
nLO n1.8: nUnderstand nthe nlife ncycle napproach nused nin nthis nbook.
CHAPTER nOUTLINE
1.1 THE nENTREPRENEURIAL nPROCESS
1.2 ENTREPRENEURSHIP nFUNDAMENTALS
A. Who nis nan nEntrepreneur?
B. Basic nDefinitions
C. Entrepreneurial nTraits nor nCharacteristics
D. Opportunities nExist nBut nNot nWithout nRisks
1.3 SOURCES nOF nENTREPRENEURIAL nOPPORTUNITIES
A. Societal nChanges
B. Demographic nChanges
C. Technological nChanges
D. Emerging nEconomies nand nGlobal nChanges
E. Crises nand n―Bubbles‖
F. Disruptive nInnovation
1
,2 Chapter n6: nManaging nCash
Flow
1.4 PRINCIPLES nOF nENTREPRENEURIAL nFINANCE
A. Real, nHuman, nand nFinancial nCapital nmust nbe nRented nfrom nOwners n(Principle n#1)
B. Risk nand nExpected nReward ngo nHand nin nHand n(Principle n#2)
C. While nAccounting nis nthe nLanguage nof nBusiness, nCash nis nthe nCurrency n(Principle n#3)
D. New nVenture nFinancing nInvolves nSearch, nNegotiation, nand nPrivacy n(Principle n#4)
E. A nVenture‘s nFinancial nObjective nis nto nIncrease nValue n(Principle n#5)
F. It nis nDangerous nto nAssume nthat nPeople nAct nAgainst nTheir nOwn nSelf-
Interests n(Principle n#6)
G. Venture nCharacter nand nReputation ncan nbe nAssets nor nLiabilities n(Principle n#7)
1.5 ROLE nOF nENTREPRENEURIAL nFINANCE
1.6 THE nSUCCESSFUL nVENTURE nLIFE nCYCLE
A. Development nStage
B. Startup nStage
C. Survival nStage
D. Rapid-Growth nStage
E. Early-Maturity nStage
F. Life nCycle nStages nand nthe nEntrepreneurial nProcess
1.7 FINANCING nTHROUGH nTHE nVENTURE nLIFE nCYCLE
A. Seed nFinancing
B. Startup nFinancing
C. First-Round nFinancing
D. Second-Round nFinancing
E. Mezzanine nFinancing
F. Liquidity-Stage nFinancing
G. Seasoned nFinancing
1.8 LIFE nCYCLE nAPPROACH nFOR nTEACHING nENTREPRENEURIAL
nFINANCE nSUMMARY
DISCUSSION nQUESTIONS nAND nANSWERS
1. What nis nthe nentrepreneurial nprocess?
The nentrepreneurial nprocess ncomprises: ndeveloping nopportunities, ngathering nresources, nand
nmanaging nand nbuilding noperations nwith nthe ngoal nof ncreating nvalue.
2. What nis nentrepreneurship? n What nare nsome nbasic ncharacteristics nof nentrepreneurs?
Entrepreneurship nis nthe nprocess nof nchanging nideas ninto ncommercial nopportunities nand
ncreating nvalue. n While nthere nis nno nprototypical nentrepreneur, nmany nare ngood nat
nrecognizing ncommercial nopportunities, ntend nto nbe noptimistic, nand nenvision na nplan nfor nthe
nfuture.
3. Why ndo nbusinesses nclose nor ncease noperating? n What nare nthe nprimary nreasons nwhy
nbusinesses nfail?
, Chapter n6: nManaging nCash 3
Flow
Nearly none-half nof nbusinesses nthat nfail ndo nso nbecause nof neconomic nfactors nincluding
ninadequate nsales, ninsufficient nprofits, nand nindustry nweakness. nMany nof nthe neconomic nfactors
nare ndirectly ntied nto nfinancing nconcerns n(e.g., ninsufficient nprofits nfor ninvestors). n Almost n40
npercent nof nbusiness nfailures nnot nciting neconomic nfactors ncite nspecifically nfinancial ncauses
nlike nexcessive ndebt nand ninsufficient nfinancial ncapital. n The nremaining ncited nreasons nfor
nfailure ninclude na nlack nof nbusiness nand nmanagerial nexperience, nbusiness nconflicts, nfamily
nproblems, nfraud, nand ndisasters. n Many nbusinesses nclose nand nfail ndue nto nfinancial ntrouble
nwhich nis nmostly nrelated nto nlack nof nsales nand nunsatisfactory nprofits.
4. What nare nfive nmegatrend nsources nor ncategories nfor nfinding nentrepreneurial nopportunities?
We nidentify nfive nmegatrend ncategories. n They nare: n(1) nsocietal nchanges, n(2)
ndemographic nchanges, n(3) ntechnological nchanges, n(4) nemerging neconomies nand nglobal
nchanges, nand n(5) ncrises nand nbubbles.
Under nsocietal nchanges nwe ndiscuss nthe ngig neconomy nand nthe nsharing neconomy. n The ngig
neconomy nis nwhere nindividuals naccept nshort-term njob nassignments nor n―gigs‖ ninstead nof
nhaving nfull-time nemployment. n The nsharing neconomy nis nwhere nindividuals nshare ntheir
nassets, nsuch nas nhomes, nvehicles, nand npersonal ntime, nwith nothers nto nprovide na nnew nway nfor
ndistributing ngoods nand nservices.
5. What nasset nand nfinancial nbubbles nhave noccurred nrecently? n How ncan nbubbles nand
nfinancial ncrises nlead nto nentrepreneurial nopportunities?
The n―dot.com‖ nor nInternet nbubble nburst nin n2000. n An neconomic nrecession nthat nbegan nin
n2001 nwas nexacerbated nby nthe n9/11 nterrorist nattack. n The nhousing nasset nbubble, nfueled nby
nsub-prime nmortgages noffered nto nborrowers nwho ncould nnot nafford nthem, nburst nin n2006. n By
nthe nsecond nhalf nof n2008, na n―perfect nfinancial nstorm‖ nerupted nand npossible nfinancial
ncollapse nbecame na nreality.
Alternative nand nrenewable nenergy, naccompanied nby nproject ncredit nsubsidies, nproduction nand
ninvestment ntax ncredits, nand nloan nguarantees nbenefited nas na nresult nof nthe nrecent nfinancial ncrisis.
nThese ndevelopments nand nother nefforts nto nstimulate neconomic nactivity nprovided nmany nnew
nentrepreneurial nopportunities.
6. What nis ne-commerce? n Why nare nthe nInternet neconomy nand ne-commerce nhere nto nstay?
E-commerce ninvolves nthe nuse nof nelectronic nmeans nto nconduct nbusiness nonline.
n Activities ninclude nmarketing nand nselling nonline nand nelectronic nretailing.
The ninternet neconomy nand ne-commerce nare nhere nto nstay. n We nwill nnever ndo nbusiness nthe
nsame nway nwe ndid nbefore nthe nInternet nand nthe nWeb. n Many nbusiness nplans nwere nfunded nwith
nthe nbelief nthat npart nof nthe nbenefit ncould nbe ncaptured nby nsellers n(producers nand nretailers).
However, nwe nnow nknow nthat nthe nWeb nso neffectively nfacilitates nprice ncompetition nthat nit nis
nhard nfor nsuppliers nand nretailers nto nprotect nmargins. n E-commerce nmay nnot ndeliver nthe
nmargins nonce nconjectured, nbut nthe nInternet nis nstill none nof nthe nmost nradical ninnovations nin
nour nlifetime.
, 4 Chapter n6: nManaging nCash
Flow
7. What nis nmeant nby ndisruptive ninnovation? n What nis nthe n―sharing neconomy‖ nsocietal ntrend?
An ninnovation ninvolves nthe nintroduction nof na nnew nidea, nproduct, nor nprocess. n A ndisruptive
ninnovation nis nan ninnovation nthat ncreates na nnew nmarket nor nnetwork nthat ndisrupts nand
ndisplaces nan nexisting nmarket nor nnetwork.
8. Identify nthe nseven nprinciples nof nentrepreneurial nfinance.
The nseven nprinciples nare:
(1) Real, nhuman, nand nfinancial ncapital nmust nbe nrented nfrom nowners
(2) Risk nand nexpected nreward ngo nhand nin nhand
(3) While naccounting nis nthe nlanguage nof nbusiness, ncash nis nthe ncurrency
(4) New nventure nfinancing ninvolves nsearch, nnegotiation, nand nprivacy
(5) A nventure‘s nfinancial nobjective nis nto nincrease nvalue
(6) It nis ndangerous nto nassume nthat npeople nact nagainst ntheir nown nself-interests
(7) Venture ncharacter nand nreputation ncan nbe nassets nor nliabilities
9. Explain nthe nstatement: n ―The ntime nvalue nof nmoney nis nnot nthe nonly ncost ninvolved nin
nrenting nsomeone’s nfinancial ncapital.‖
The ntotal ncost nof nrenting nsomeone‘s nfinancial ncapital nis ntypically nsignificantly nhigher nthan
njust nthe ntime nvalue nof nmoney ndue nto nthe npossibility nthat nthe nventure nwon‘t nbe nable nto npay.
n The nrent nis nrisky nor nuncertain nrequiring nan nexpected ncompensation nin naddition nto nthe ntime
nvalue nof nmoney nfor nthe nrenting nagreement nto nbe nput nin nplace.
10. How ndo npublic nand nprivate nfinancial nmarkets ndiffer?
Public nfinancial nmarkets nare nmarkets nwhere nstandardized ncontracts nor nsecurities nare
ntraded non norganized nsecurities nexchanges. n Private nfinancial nmarkets nare nmarkets nwhere
ncustomized ncontracts nor nsecurities nare nnegotiated, ncreated, nand nheld nwith nrestrictions non
nhow nthey ncan nbe ntransferred.
11. What nis nthe nfinancial ngoal nof nthe nentrepreneurial nventure? n What nare nthe nmajor
ncomponents nfor nestimating nvalue?
The nventure‘s nfinancial ngoal nis nto nmaximize nthe nvalue nof nthe nventure nto nits nowner(s). n The
nmajor ncomponents nof nestimating nvalue nare nprojected nfree ncash nflow n(cash ngenerated nin na
nspecified ntime nperiod nthat nexceeds nfunds nneeded nto noperate, npay ncreditors, nand ninvest nin nthe
nassets nneeded nto ngrow nthe nventure) nand nits nrisk n(including nthe ntiming nand nrealized namount).
12. From nan nagency nrelationship nstandpoint, ndescribe nthe npossible ntypes nof nproblems nor
nconflicts nof ninterest nthat ncould ninhibit nmaximizing na nventure’s nvalue.
There nare ntwo nbasic ntypes nof nconflicts. n Owner-manager n(agency) nconflicts noccur nwhen
nthere nare ndifferences nbetween nmanagers‘ nself-interests nand nthe ninterests nof nthe nowners nwho
nhired nthe
