Foundations of Finance (9th Edition) (Pearson Series in Finance)
Foundations of Finance (9th Edition) (Pearson Series in Finance)
9th Edition
ISBN: 9780134083285
Author: Arthur J. Keown, John D. Martin, J. William Petty
Publisher: PEARSON
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Chapter 1, Problem 2RQ
Summary Introduction

To discuss: The reasons on whether projects oppose the goal of maximization of shareholder wealth.

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Firms often involve themselves in projects that do not result directly in profits. For example, Microsoft corporation donated $10 million to Stanford University hospitals and another $40 million to the African aid organization (Product) RED, a charity fighting against AIDS, tuberculosis, and malaria. Do these projects contradict the goal of maximization of shareholder wealth? Why or why not?
Firms often involve themselves in projects that do not result directly in profits. For example, Microsoft corporation donated $10 million to Stanford University hospitals and another $40 million to the African aid organization (Product) RED, a charity fighting against AIDS, tuberculosis, and malaria. Do these projects contradict the goal of maximization of shareholder wealth? Why or why not?     What is the agency problem, and how might it impact the goal of maximization of shareholder wealth?     What is corporate governance? What role does a corporation’s board of directors play in corporate governance?   The manager of Golden Ray Corporation receives a bonus if company profits exceed $1,000,000 this year. During the final week of the year, the manager changes an accounting policy that will increase reported profits from $950,000 to $1,025,000, triggering his bonus. The change in profits of $75,000 will reverse itself in the next year, and the accounting change has no impact on…
7. If all companies only focused on making a profit and increasing shareholdervalue, and not giving to charity, would society be better off? Explain.
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