Question

3) The board of directors of Craigco is looking to expand and has 3 potential investment opportunities. a. Implementation of new ordering software that will make the ordering process simpler for customers and employees b. A new product line with high profit margins and a strong market c. Creation of a charitable organization in the company's name that donates to a popular cause with the company's target market. d. A revamp of executive bonuses to better align management effort with the goals of the shareholders. Discuss the pros and cons of each investment opportunity and recommend which one you think will maximize shareholder value.

Answer 1

Shareholder value : It is the value given to stockholders in a company based on the firm's ability to sustain and grow profits over time. Increasing shareholder value increases the total amount in the stockholders' equity section of the balance sheet.

Option B is the best because expansion in new market and new product line will result into higher sales and profit. Profit of the business ultimately belongs to the share holders. high profit will maximise shareholder value.