Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 1, Problem 11CRCT
Goal of the Firm [LO2] Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
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Evaluate the following:Managers should not focus on the current stock value because doing so will lead to an over emphasis on short term profits at the expense o long term profits
Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on the short term profits at the expense of long-term profits.
Explain how managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
Chapter 1 Solutions
Fundamentals of Corporate Finance
Ch. 1.1 - What is the capital budgeting decision?Ch. 1.1 - What do you call the specific mixture of long-term...Ch. 1.1 - Prob. 1.1CCQCh. 1.2 - Prob. 1.2ACQCh. 1.2 - Prob. 1.2BCQCh. 1.2 - Prob. 1.2CCQCh. 1.2 - Prob. 1.2DCQCh. 1.3 - Prob. 1.3ACQCh. 1.3 - What are some shortcomings of the goal of profit...Ch. 1.3 - Prob. 1.3CCQ
Ch. 1.4 - Prob. 1.4ACQCh. 1.4 - Prob. 1.4BCQCh. 1.4 - What incentives do managers in large corporations...Ch. 1.5 - Prob. 1.5ACQCh. 1.5 - Prob. 1.5BCQCh. 1.5 - Prob. 1.5CCQCh. 1 - Deciding which fixed assets should be purchased is...Ch. 1 - What form of ownership is easiest to transfer?Ch. 1 - Prob. 1.3CTFCh. 1 - Prob. 1.4CTFCh. 1 - Prob. 1CRCTCh. 1 - Prob. 2CRCTCh. 1 - Prob. 3CRCTCh. 1 - Prob. 4CRCTCh. 1 - Prob. 5CRCTCh. 1 - Prob. 6CRCTCh. 1 - Prob. 7CRCTCh. 1 - Primary versus Secondary Markets [LO3] Youve...Ch. 1 - Auction versus Dealer Markets [LO3] What does it...Ch. 1 - Not-for-Profit Firm Goals [LO2] Suppose you were...Ch. 1 - Goal of the Firm [LO2] Evaluate the following...Ch. 1 - Ethics and Firm Goals [LO2] Can our goal of...Ch. 1 - Prob. 13CRCTCh. 1 - Prob. 14CRCTCh. 1 - Prob. 15CRCTCh. 1 - Prob. 16CRCTCh. 1 - Prob. 1MCh. 1 - Prob. 2MCh. 1 - Prob. 3M
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- is(are)the reason(s) for profit maximization not a reasonable goal for firms. a. Profit concept ignores timing of the returns b. Profit concept ignores the cash flow available to stock holders c. Profit is risky and can be some times loss d. All the abovearrow_forwardA financial manager's goal of maximizing current or short-term earnings may not be appropriate because: Multiple Choice it considers the timing of the benefits. share ownership is widely dispersed. increased earnings may be accompanied by acceptably higher levels of risk. earnings are subjective, they can be defined in various ways such as accounting or economic earningsarrow_forwardDoes decreasing net margin percentages and slightly increasing financial leverage have an effect on Return on Equity (ROE)?. If Yes, What should a company do to solve such problem.arrow_forward
- which one is correct please confirm? QUESTION 21 Finance researcher Myron Gordon argues that ____. a. the clientele effect has no influence on share value b. the existence of transaction costs has no impact on the dividend decision c. dividends reduce uncertainty, and thus the payment of dividends will increase the firm's value d. risk-averse shareholders may prefer some dividends over the promise of future capital gains if the interest rate is expected to declinearrow_forwardWhich of the following are false? I) Managers are reluctant to make dividend changes that might have to be reversed. II) Shifts in long-term sustainable earnings are followed by dividend changes. III) Firms have long-term target dividend payout ratios. Il only I only Il only Nonearrow_forwardWhat types of firms would we expect to observe higher direct agency costs of equity, such as consuming excessive perquisites by management ? Question 7 options: a) Firms with high free cash flows b) Firms with fewer growth opportunities c) Firms with weak governance structures d) All of the above options are correct e) None of the options are correctarrow_forward
- Can Retained Earnings grow too large? If so, what strategies might management take to reduce it?arrow_forwardTrue or False Please answer both. 1. High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price. 2. When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.arrow_forwardIs this statement true or false? Give a reason for your answer. " Relevant or not, frequent changes in dividend policy can harm a firm."arrow_forward
- Which of the following actions should a manager take to optimize the firm's value? * Changing the capital structure if and only if the firm's value rises. Changing the capital structure if and only if the firm's value rises to the advantage of inside management Changing the capital structure if and only if the firm's value increases solely to the benefit of debtholders. Changing the capital structure if and only if the firm's value increases, even if it lowers stockholders' value. Changing the capital structure if and only if the firm's value grows and stockholder equity remains stable.arrow_forwardstock? 7.11 Stock Valuation Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits. LO 2 LO 1 7.12 Constant Dividend Growth Model In the constant dividend growtharrow_forwardCeteris paribus, current financial market returns will increase as _____. Group of answer choices a. the uncertainty about the productivity of capital goods increases and people become more risk averse b. the uncertainty about the productivity of capital goods increases and people become less risk averse c. the uncertainty about the productivity of capital goods decreases and people become more risk averse d. the uncertainty about the productivity of capital goods decreases and people become less risk aversearrow_forward
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