Assume that you recently finished your second-year studies in the corporate management field

and have just reported to work as an investment strategist at the brokerage firm of Darwin

Entertainment Services (DES). One of the firm’s clients is Karen Diet, a professional designer

who has just come to the Australia from Europe. Karen Diet celebrated her 26th birthday with

a lotto ticket that turned out to be a gift worth millions of dollars. She would like to start a

company to produce and market apparel she designs for the entertainment industry and later

invest in real estate. Diet has overheard that in real estate investments, mortgage securitisation

could have a negative impact to the financial market.

Your task:

Your boss has developed the following set of questions you must answer (task for this

assessment item) to explain the financial system to Karen Diet before she signs a contract with

DES.

The structure of the report should be appropriate to your audience, include an executive

summary and address each of the following questions:

Question 1

Explain to Karen Diet why corporate finance is important to stakeholders? Describe the

organisational forms Diet’s intended company might have as it evolves from a start-up to a

major corporation.

Question 2

It is Karen Diet’s dream to run a corporation in the future. Discuss how corporations go public

and continue to grow. Use relevant examples from the Australian financial system. Discuss

some of the agency problems Diet might encounter and explain how such agency problems can

be resolved.

Question 3

Demonstrate to Karen Diet how mortgage securitisation has contributed to the global

economic crisis.