Which of the following statements is (are) true? (I) Managers should not focus o

Question

Which of the following statements is (are) true?

(I) Managers should not focus on maximizing stock value because doing so will lead to an overemphasis on short term earnings at the expense of long term investments.

(II) Other stakeholders will generally agree that the primary goal of the firm should be to maximize shareholders’ wealth because they have a prior claim over shareholders to the firm’s cash flow and liquidation value.

(III) Investments worth more than they cost will also have rates of return greater than their opportunity cost of capital.

(IV) We value investment assets by valuing their cash flow streams. Cash flow streams are unique in terms of the size of their cash receipts, their timing, and their risk.

Explanation / Answer

Solution:

Which of the following statements is (are) true?

Right Option is (I) Managers should not focus on maximizing stock value because doing so will lead to an overemphasis on short term earnings at the expense of long term investments.

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