FIN 302- Final Tips - Final Goal of managers of firm max...

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Final Goal of managers of firm max shareholder wealth, weighs risk return trade off What types of risk are we talking about in risk return tradeoff market risk, and market risk alone. Stock price formulas, one you hadn’t seen before = EPS over r, Positive NPV opportunities, finding positive NPV projects one direct way managers max shareholder wealth. Stakeholder theory includes firm’s employees, customers, in addition to bond holders and shareholders, if you don’t max s/h wealth it probably will not be sustainable when firm has less worth then worth what it is supposed to be it will become a takeover target. If managers don’t max shareholder wealth, in order to raise capital at appropriate rate of return they will have to raise prices for stuff they are selling and will make them less competitive. Economy unsustainable just to peruse stakeholders, up prices to cover costs, pretty much impossible to peruse stakeholder max without charging customer more Risk and return what type of risk do investors want to be compensated for…market risk!
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