Notes #1 Managerial Objective

Notes #1 Managerial Objective - Notes#1 Professor Kose John...

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Notes #1 Professor Kose John Managerial Objectives and Valuation Rules In most of our discussion of corporate finance the framework we use for evaluating various corporate decisions will have the following building blocks. Managerial Objective : In perfect markets a proper managerial objective is to maximize the market value of the stockholder's equity in the firm. Such an objective makes sense even though the firm is widely held by heterogeneous shareholders. This objective is equivalent to that of maximizing the market value of the entire firm, provided all the non-equity liabilities of the firm are properly priced in the market. See BM (Brealey and Myers) Chapter 2. Even though we will consider various imperfections and corporate and personal taxes in our discussion of corporate decisions, appropriately modified versions of the above objective will be useful. This managerial objective will be useful in evaluating investment strategies and evaluating financing strategies and dividend policies.
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