Discuss why corporations should pursue market value maximization versus maximizing profit.
Discuss why corporations should pursue market value maximization versus maximizing profit.
Homework Answers
Maximizing value of the firms leads to a long term higher earnings (profits). Sometimes it may not be a good strategy to have a maximized profit initially but to have an investment that shall pay off much higher in the future. Increased future cash flows shall increase the value of the firm. Therefore the basic premise shall be to have a sustained higher profit, today or tomorrow. A higher sustainable profit shall lead to the maximized market value. It is so because market value is a function of valuations which in turn depend on the future cash flows and not just present year cash flows.
Maximization of market value happens from maximizing profit in the long run. The two are closely linked. however difference arises in terms of time. While profit maximization refers to the maximization of profit in near term or current year while maximization of value refers to sum of future profits/cash flows.
For example a firm that may not invest in new technology today may have a higher profit in current year but future profits shall reduce. This shall lead to a less market value and may lead to an eventual decline of the company.
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Discuss why corporations should pursue market value maximization
versus maximizing profit.
Discuss why corporations should pursue market value maximization vs maximizing profit.
Discuss why corporations should pursue market value maximization vs maximizing profit.
If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth, Se...
If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth, Select one: a. they are more likely to become takeover targets of profit-maximizing firms. b. they are less likely to be replaced by stockholders. c. they are less likely to be replaced by the board of directors. d. they are more likely to have higher profit than if they had pursued that policy explicitly. e. their companies are more likely to...
1. [Multi-product Firm’s Profit Maximization] Find (i) the profit maximizing output levels x and y and...
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Is profit maximization the same thing as shareholder wealth maximization? Why or why not? Describe the...
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Profit maximization: Suppose you have a firm that, because it has some market power, faces a...
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explain why maximizing profit falls short of maximizing shareholders wealth
explain why maximizing profit falls short of maximizing shareholders wealth
Q.1) Discuss the altemative goals of the firm and explain why finance recommends shareholder value maximization?...
Q.1) Discuss the altemative goals of the firm and explain why finance recommends shareholder value maximization? [25 marks] Q.2) Discuss the reasoning of agency theory recommendations for an independent board structure to enhance Corporate Govemance. Examine the extent to which Agency Theory's recommendations have led to enhance firm performance? (25 Marks]
QUESTION 16 The primary goal of the corporation should be A. Maximization of profits B. Maximization...
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Chapter 9 Profit Maximization instructions help < Question 1 (of 7) Save & Exit Submit value: 0.28 points If th...
Chapter 9 Profit Maximization instructions help < Question 1 (of 7) Save & Exit Submit value: 0.28 points If the demand function for Noah and Naomi's garden benches is Q=D(P) Q=25/(P05), what is their inverse demand function? OP = 25*(Q). OP= 25/(Q*Q). O P = 5/(Q*Q). OP=625*(Q*Q). Op = 625/(Q*Q). eBook & Resources 9.1 PROFIT-MAXIMIZING QUANTITIES AND PRICES
Show transcribed image text Chapter 9 Profit Maximization instructions help
If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth, Select one: a. they are more likely to become takeover targets of profit-maximizing firms. b. they are less likely to be replaced by stockholders. c. they are less likely to be replaced by the board of directors. d. they are more likely to have higher profit than if they had pursued that policy explicitly. e. their companies are more likely to...
Q.1) Discuss the altemative goals of the firm and explain why finance recommends shareholder value maximization? [25 marks] Q.2) Discuss the reasoning of agency theory recommendations for an independent board structure to enhance Corporate Govemance. Examine the extent to which Agency Theory's recommendations have led to enhance firm performance? (25 Marks]
QUESTION 16 The primary goal of the corporation should be A. Maximization of profits B. Maximization of shareholder wealth C. Maximization of sales D. Minimization of risk QUESTION 10 A disadvantage of organizing a business as a corporation is that A. The owners have unlimited legal liability for corporate losses B. Other forms of business organization provide greater funding flexibility than do corporations C. Owners of a corporations are potentially subject to double taxation D. All of the above are...
Chapter 9 Profit Maximization instructions help < Question 1 (of 7) Save & Exit Submit value: 0.28 points If the demand function for Noah and Naomi's garden benches is Q=D(P) Q=25/(P05), what is their inverse demand function? OP = 25*(Q). OP= 25/(Q*Q). O P = 5/(Q*Q). OP=625*(Q*Q). Op = 625/(Q*Q). eBook & Resources 9.1 PROFIT-MAXIMIZING QUANTITIES AND PRICES
Show transcribed image text Chapter 9 Profit Maximization instructions help
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