The president of Southern Semiconductor Corporation (SSC) made this statement in the companys

QUESTION

The president of Southern Semiconductor Corporation (SSC) made this statement in the companys annual report: SSCs primary goal is to increase the value of our common stockholders equity. Later in the report, the following announcements were made: a. The company contributed $1.5 million to the symphony orchestra in Birmingham, Alabama, its headquarters city. b. 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 versus what they would have been had the decision not been made to expand in that market. c. The company holds about half of its assets in the form of U.S. Treasury bonds, and it keeps these funds available for use in emergencies. In the future, though, SSC plans to shift its emergency funds from Treasury bonds to common stocks. Discuss how SSCs stockholders might view each of these actions, and how they might affect the stock price.
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