1. As a CEO and chairman, it is the prime duty to impress the
directors and shareholders of thecompany. As I hold the two
important positions it is quite easy to impress the board director
andtheshareholdersandapprovetheinvestmentdecision.Thecompanyisdirectlylinedtothebusinessof
course. !ohavin"acourseadditional tothere"ular servicefor
thepurposeofcompany use and servin" ma#or client will be
beneficial. It will minimi$e the company cost ofhirin" course for
above purpose. It will also add an asset for the Company that
increases the totalasset of the firm. %ore satisfied client means
havin" more wor order that ma&imi$esprofitability and increased
E'! of the ultimate owner of the firm that means to the stocholder.
Itmaes the company to feel rich "ettin" e&tra facilities to the
mana"ement. !o employees of thefirm will be motivated to the wor.
That will increase productivity and customer satisfaction ofthe
company. (ecause they are the only reason for customer
satisfaction,if employees aren)tsatisfied they will not properly
handle the customer. *or service oriented business it is too
muchimportant. (y addin" any value to the company mae a difference
amon" competitor by creatin"specialty that means e&tra company
ima"e is seems and e&istin" and prospective investors
willbeattracted.Thatwillfulfillthetar"et
ofraisin"+%,--millionfinancin"decisionthrou"hshare issue. The
company decision to raisin" fund from e&istin" shareholders is
difficult and it isonlypossiblebyattractin"themtoplacetheir
fundtotheir trustedinvestment pro#ect, byconvincin" them..avin"
another course may open a new era of business if so acquire the
cruiseliner would definitely add a source of revenue to the
business of %onteiro (erhad Company. Thecompany can offer different
types of paca"e pro"rams for their clients lie they can tie/up
withinternational and local airlines with paca"ed tours for forei"n
and local tourists. !ide by side havin" a course will be helpful
for new entrant employee of the firm. They can learnpractically
their #ob more sophisticatedly that will benefit the company in the
time of deliverin"tothecustomer. Alsoincreaseemployeeperformance,
theywill en#oytheir worandsuchtrainin" activitieswillmotivate
themto worfor the company attainin"company ob#ectives.Thus will
reduce the employee turnover of the company and helps to eep
business secret safely.As part of their motivational tool this
course will be helpful, they can en#oy their recreation
withtheirfamilyasrewardoftheirhardworforthecompany.%otivatedemployeewill
not beattracted for main" any harmful activities and corruption
that is detrimental for the company.The CEO can also persuade the
board and stocholders that +%0- million wasn)t much hi"hcomparin"
its paca"e of financin" of +%,-- million. This course will add more
employmentopportunity for the people. If the Company adds a cruise
liner then the company can ensure more business by attractin"
itsclients. This investment will also increase the company)s outloo
and ima"e by the decision ofsuch lu&urious cruise liner.
!atisfied clients will also looin" forward to main" more deal
with%onteiro(erhadcompanywhichwill
alsofacilitatetoincreasebusinessdealsof%onteiro(erhadCompany.Inclusionofthecruiselinerwill
alsoup"rade%onteiro(erhadCompanyfrom its competitor.After the
worldwide economic recession the economic sector is recoverin".
Tourism is one ofthem if the company catch the opportunity then
this cruise liner added a new dimension to theirbusiness since
cruisin" has become a ma#or part of the tourism industry today.
!ince it is a "reatattraction for tourist clients especially who
are ocean lovers. !o Acquirin" the cruise liner woulddefinitely add
a source of revenue to the business of %onteiro (erhad company. The
companycan offer different types of paca"e pro"rams for their
clients lie theycan tie/up withinternational and local airlines
with paca"ed tours for forei"n and local tourists1. As a
shareholder of %onteiro (erhad the decision of purchasin" new
cruiser for the purpose ofbusiness use and servin" client will not
add any value to the company. !hareholdin"s of thiscompany havin"
1--- share is not much hi"h. Investors always e&pect a hi"her
return from theirinvestments. %ana"ers are the a"ent of the owner
of the company. As a result of "ettin" theposition of CEO and the
Chairman of the company he 23atu 4alanian5 creates a"ency problemto
the or"ani$ation. As a result of addin" e&tra 1-- shares
costin" +%110- is a risy investmenttome. (ecausethis investment is
not donefor productivepurposeandalthou"htheCEOpersuadin" that it
will enhance the business ima"e and profitability but in actual
cases it will notplay any si"nificant impact in shareholders
dividend or return whatever called. (ut thecompany)s total
investment is hi"her than the decision of purchasin" the cruise
liner. If the restof the part of the investment used in productive
business activities then the decision of addine&tra investment
to the company will be beneficial to the company. As the case
mainly focusedon purchasin" the cruise the CEO proposals to the
board and approvin" to the board is quite
easybecauseheholdsthebothposition.Asasmall investor
anyopposefrommysidewill notpostpone the proposals. The overall
reasons for not investin" additional fund to the company are%r.
3atu 4alanian holds position of CEO and Chairman ille"ally as
a"ainst of country law6 theinvestment
decisionwasn)ttowardstheor"ani$ational
ob#ectivestoincreasetheshareholdersreturn but creates additional
cost of maintainin" the cruise and only the mana"ement will
taebenefit from this action. This business pro#ect is too much
lu&urious because it holds almost 11.07 of the total finance
paca"e.8ithout "ettin" handsome dividend from shares is not the
ultimate ob#ective of the
shareholdernow.Ifthecompanycanshowoffitselfamon"itsindustryit will
"ivetheshareholdersaninternal respect. The purchase decisions that
are said by the CEO to increase the company
ima"ethatultimatelyincreasetheprofitabilityofthecompanymaynotbetrue,
becauseintoday)sworld information is available promptly. This
decision will not "ive any e&tra advanta"e thancompetitor
because of the useless investment decision. In some aspect it seems
that by addin"e&tra cruise added an e&tra asset of the firm
will benefit the shareholders when the company is"oin" to be liquid
but this hypothesis is completely uneconomical. 9. The principal
function of any corporate loan mana"er is to analysis the proposed
financin"decisionsbasedontheviabilityofthepro#ect that
meanswhethertheproposal isprimarilyob#ective oriented or not.
(efore main" any final decision some important aspects are to
beconsidered before sanctionin" any loan. Aspects are 'rofitability
of the loan proposals Ob#ective of the proposals *unctions of the
asset purchase decision :ifetime of the proposals Contribution to
the business Increased productivity etc. Considerin" the loan
proposals of buyin" the cruise violates the above important
aspects.. Thatwill create a"ency problem in the firm. The CEO is
not actin" for the betterment of the companyrather own benefit. As
a credit mana"er the purchase decision is made completely for the
purposeof increasin"lu&uriatehabit of themana"erscurrent trend
Althou"htheCEOattemptedtoconvince that will increase the business
by attractin" more clients but the office use and yearly !o in my
#ustification bein" a corporate loan mana"er at ;.( (an it is my
duty to accept orre#ect any request for corporate loan. After
analysin" the si$e of the company %onterio (erhadand their
investment amount it seem to be a risy decision to sanction
corporate loan to thiscompany. If loan is "iven to %onterio (erhad
, it can loss other effective loan opportunity whichwill
payoffmuchhi"herinterest. (esides,
%onterio(erhadisamediumsi$ecompanyforwhich addin" new cruise liner
for company use and impressin" clients is a lu&urious decision.
!othere is a "reat chance that the company can default to repay the
loan or fail to pay the promisedinterest on time. As %onterio
(erhad is not a lar"e business so it has much volatile
profitabilityand addin" this type of unproductive investment can
put the company bacward or even can faceany loss. That can be a
reasons for %onterio (erhad Company will to not "enerate enou"h
profit.8ith a volatile return from this investment the loan will be
more unsecure loan and also a threatfor ;.( (an if we intended to
"ive a loan to this company. .
