Lecture 2

Lecture 2 - The Objective in Corporate Finance If you dont...

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The Objective in Corporate Finance “If you don’t know where you are going, it does not matter how you get there” The Classical Viewpoint: Van Horne : "In this book, we assume that the objective of the firm is to maximize its value to its stockholders" : "Success is usually judged by value: Shareholders are made better off by any decision which increases the value of their stake in the firm. .. The secret of success in financial management is to increase value." : The most important theme is that the objective of the firm is to maximize the wealth of its stockholders." Brigham and Gapenski : Throughout this book we operate on the assumption that the management's primary goal is stockholder wealth maximization which translates into maximizing the price of the common stock. Why focus on maximizing stockholder wealth? Stock price is easily observable and constantly updated (unlike other measures of performance, which may not be as easily observable, and certainly not updated as
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This note was uploaded on 04/04/2012 for the course FIN 400 taught by Professor Kedia during the Spring '12 term at Rutgers.

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Lecture 2 - The Objective in Corporate Finance If you dont...

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