EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 1, Problem 5QTD
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To discuss: The reasons of social responsibility activities are not inconsistent with the wealth maximization of shareholders.
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It has been argued that shareholder wealth maximization is not a realistic normative goal for the firm, given the social responsibility activities that the firm is “expected” to engage in (such as contributing to the arts, education, etc.). Explain why these social responsibility activities are not necessarily inconsistent with shareholder wealth maximization.
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What goals might be pursued by managers instead of maximization of shareholder wealth?
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- Why do you think that wealth maximization is an appropriate goal of the firm? Does it lead to maximization of the wealth of shareholders? Does an attempt by the management to maximize value ofthe firm benefit the society? Explain.arrow_forwardCan a firm maximize its profit if it is only managed to meet shareholders' interests? (Own words please)arrow_forwardDiscuss Mark 10:23-25 and its application to capital rationing and maximizing shareholder wealth. Capital rationing could affect the returns to shareholders. An ethical dilemma is faced by the executives of the business. Capital rationing could affect the stakeholders (other than the shareholder) of the business. Should capital constraints modify the principle of maximizing shareholder wealth?arrow_forward
- Shareholder wealth maximization and social responsibility – Is shareholder wealth maximization inconsistent with social responsibility (contributing to the arts, education, social programs, etc.)? Explain why social responsibility activities may or may not be inconsistent with shareholder wealth.arrow_forwardThe objective of financial management is to maximise the value of the firm. We can convert this into the objective of maximising shareholder value. Explain why wealth maximisation takes both risk and return into account.arrow_forwardIdentify the conflict between the goal of shareholder wealth maximization and other stakeholder concerns (sometimes referred to as environmental, social, and governance (ESG) concerns).arrow_forward
- How do the shareholders of an organization can encourage its manager to act in a way which is consistent with the objective of maximization of shareholders' wealth?arrow_forwardThe net present value technique is an approach that goes against the goal of shareholder wealth maximization. True Falsearrow_forwardDiscuss the topic of maximizing shareholder wealth. This topic has been researched and studied for many years, with mixed results. For example; Irving Fisher, a prominent American Economist, argued that maximizing shareholders wealth should be management’s primary goal. Conversely, Sollars and Tuluca suggested that shareholders should only be rewarded with returns that are commensurate with the risk they take. Explain the advantages and disadvantages of wealth maximization from the perspective of a company’s Chief Financial Officer. Include the effect on company stakeholders – internal (managers, employees) and external (suppliers, shareholders).arrow_forward
- Explain and evaluate how the primary of objective in financial management of maximizing shareholder wealth is at conflict with other objectives such as ensuring favorable outcomes for (Note if your organization is public sector consider the alternative objective of minimizing the net cost to the government)arrow_forwardA goal of financial management is to maximize the shareholders' value. What are the pros and cons of this goal? Explain whether you agree or disagree with this goalarrow_forwardhow is financial decisions helps create value for the firm's shareholder?arrow_forward
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