Maximization of shareholder wealth as a goal is superior toprofit maxi
QUESTION
Maximization of shareholder wealth as a goal is superior toprofit maximization because:a. it considers the time value of the moneyb. it considers the time value of money and factors inuncertaintyc. it ensures high stock pricesd. it considers social benefits
Answer: b. it considers the time value of money and factors inuncertainty. Explanation: When shareholders choose to invest in a company, they are giving upthe time value of their money as they would be if they invested ina risk-less security; additionally, they also need to becompensated for the amount of risk
hey take on by investing inthis particular company. The alternative goal, profit maximization,might tempt executives to engage in highly risky projects that facethe possibility of an extremely negative result.
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