Question

Which of the following is not a valid motive for corporate risk management (hedging)? a. Reducing...

Which of the following is not a valid motive for corporate risk management (hedging)?

a. Reducing the probability of bankruptcy

b. Enhancing the effectiveness of performance-based compensation for managers

c. Offsetting the costs of insurance

d. Reducing the firm’s expected tax liability

0 0
Add a comment Improve this question Transcribed image text
Answer #1

please find below solution...

correct answer is option : b. Enhancing the effectiveness of performance-based compensation for managers

Add a comment
Know the answer?
Add Answer to:
Which of the following is not a valid motive for corporate risk management (hedging)? a. Reducing...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • 1. Reasons to manage risk Aa Aa Firms deal with different types of risk in their...

    1. Reasons to manage risk Aa Aa Firms deal with different types of risk in their day-to-day operations and adopt risk management strategies. It is important to understand why firms manage risk. A company's share price is a function of two factors: the discounted value of its free cash flows and its weighted average cost of capital (WACC). According to financial theory, the company's managers should accept and implement a risk management strategy if the implementation of the strategy leads...

  • 1. Overview of financial planning Which of the following states the firm's overall purpose? O Corporate...

    1. Overview of financial planning Which of the following states the firm's overall purpose? O Corporate scope Mission statement O Statement of corporate objectives Which of the following defines the company's lines of business and its geographic area of operations? O Corporate scope O Mission statement O Statement of corporate objectives Which of the following sets forth specific goals or targets to help operating managers focus on the firm's primary objectives? Corporate scope Mission statement Statement of corporate objectives Which...

  • 1. Which risk management technique is best applied to a loss exposure that has a high...

    1. Which risk management technique is best applied to a loss exposure that has a high frequency of occurrence and high severity when losses occur? risk transfer                 b. risk retention                 c. risk control                d. risk avoidance     2. Claire workers for Travelers Insurance Company. Her job is to review applications for insurance, to decide whether Travelers should accept the applicant, and to assign acceptable applicants to the appropriate rating category. Claire is a(n) a. claims adjuster.                                   c. underwriter.                                e....

  • john c hull risk management 1.4 What is the difference between systematic and nonsystematic risk? Which...

    john c hull risk management 1.4 What is the difference between systematic and nonsystematic risk? Which is more important to an equity investor? Which can lead to the bankruptcy of a corporation? 1.5 Outline the arguments leading to the conclusion that all investors should choose the same portfolio of risky investments. What are the key assumptions? 1.6 The expected return on the market portfolio is 12% and the risk-free rate is 6%. What is the expected return on an investment...

  • Which of the following is true of corporate-sustaining costs? A) are common to all individual customers...

    Which of the following is true of corporate-sustaining costs? A) are common to all individual customers B) have a clear cause-and-effect relationship with several cost-allocation bases C) should be allocated for decisions regarding reducing customer costs D) evaluates the effectiveness of sales personnel

  • Which of the following statements are TRUE? A) A decrease in default risk on corporate bonds...

    Which of the following statements are TRUE? A) A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds. B) The expected return on corporate bonds decreases as default risk increases. C) A corporate bond's return becomes less uncertain as default risk increases. D) As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds. Answer: B WHY ACD FALSE?

  • Which one of the following factors is not considered in calculating the firm’s cost of equity? risk free rate of retu...

    Which one of the following factors is not considered in calculating the firm’s cost of equity? risk free rate of return beta interest rate on corporate debt expected return on equities difference between expected return on stocks and the risk free rate of return Which one of the following factors is not considered in calculating the firm’s cost of capital? cost of equity interest rate on debt the firm’s marginal tax rate book value of debt and equity the firm’s...

  • Allocation of corporate-sustaining costs is useful for which of the following? A) evaluating the performance of...

    Allocation of corporate-sustaining costs is useful for which of the following? A) evaluating the performance of salespersons with individual customer accounts B) motivating distribution-channel management C) focusing on the cause-and-effect relationships with the cost-allocation bases D) motivating division managers to examine how corporate costs are planned and controlled Block Island TV currently sells large televisions for $380. It has costs of $290. A competitor is bringing a new large television to market that will sell for $320. Management believes it...

  • Petron​ Corporation's management team is meeting to decide on a new corporate strategy. There are four​...

    Petron​ Corporation's management team is meeting to decide on a new corporate strategy. There are four​ options, each with a different probability of success and total firm value in the event of​ success, as shown​ here: LOADING.... Assume that for each​ strategy, firm value is zero in the event of failure.​ Also, suppose Petron Corp. has debt with a face value of $ 42 million outstanding. For simplicity assume all risk is​ idiosyncratic, the​ risk-free interest rate is​ zero, and...

  • Petron​ Corporation's management team is meeting to decide on a new corporate strategy. There are four​...

    Petron​ Corporation's management team is meeting to decide on a new corporate strategy. There are four​ options, each with a different probability of success and total firm value in the event of​ success, as shown​ here: LOADING.... Assume that for each​ strategy, firm value is zero in the event of failure.​ Also, suppose Petron Corp. has debt with a face value of $ 42 million outstanding. For simplicity assume all risk is​ idiosyncratic, the​ risk-free interest rate is​ zero, and...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT