EBK FOUNDATIONS OF FINANCE
10th Edition
ISBN: 9780135160473
Author: KEOWN
Publisher: PEARSON CO
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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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1. Discuss: Firms often involve themselves in projects that do not result directly in profits. For example, Apple donated $50 million to Stanford University hospitals and another $50 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?
7. If all companies only focused on making a profit and increasing shareholdervalue, and not giving to charity, would society be better off? Explain.
What are the concerns about SRI investing in today’s economy? And does the present rating system for ESG give us a fair view of how socially responsible a corporation is?
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- What is meant by the goal of maximization of shareholder wealth? The government has passed regulations that require pollution controls, development restrictions, and pay equity over the years. But, can a firm still achieve the maximization of shareholder wealth? How?arrow_forwardFinancial Institutions are intermediaries that play a vital role in nation-building. They source funds for businesses to engage in projects that are profitable, maximize shareholder wealth, and build communities. What is a project that is worthwhile, has the potential to earn profits, and will benefit the community in the long term? List down those projects and What financial institutions can help you achieve your dream of a sustainable business for your shareholder or community?arrow_forwardBecause corporations do not actually raise any funds in markets, they are less important to the economy than primary markets. Commentarrow_forward
- Discuss 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_forwardWhy should maximizing the wealth of our owners be your PRIMARY financial objective as a future Chief Financial Officer of a publicly listed firm, but corporate social responsibility is considered secondary only?arrow_forwardDue to the recent outbreak of the COVID-19 pandemic, the operations of many MNCs weredisrupted. One of your friends makes the following statement: “Globalisation is dead! Why areyou wasting your time studying international finance?”.a) How would you respond to her? Please note that your friend is not a business graduate anddoes NOT understand the terminology of business/economics/finance. Therefore, explain why she is wrong (or right). For this partarrow_forward
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