As an investor in EasternSemiconductor Corporation, what do you think of the following statements? Justify your opinion.
The president of Eastern Semiconductor Corporation (ESC) stated in the company's Annual Report to Shareholders that ESC's goal is to increase the value of our common shareholder's equity. Later in the report, the following announcements were made:
1. The company contributed $1.5 million dollars to the symphony orchestra in the company's headquarters city.
2. The company is spending $500 million to open a new plant and expand operations in China. No profits will be produced by the Chinese operation for 4 years, so earnings will be depressed during this period verses what they would have been had the decision not been made to expand in that market.
If the goal is to increase the value of shareholders equity:
1. My first impression as an investor would be to consider the integrity of the President and the company. Without reading the financial statements and the report in full it would be a little rash to jump to conclusions but I would definitely dig deeper. If the stated goal of the president is aligned with my investment goals, I would wonder why in the world is this ...
This solution provides a detailed discussion of the given finance problem.