Which of the following statements is correct? a. As long as managers stay within

Question

Which of the following statements is correct? a. As long as managers stay within the law, there is no way to either force or motivate managers to act in the b. Because of their simplified organization, it is easier for sole proprietorships and partnerships to raise large c. Bondholders and shareholders equally prefer that managers invest in safer projects with d. The primary operating goal of a publicly-owned firm inter 1. stockholders' best interests. amounts of outside capital than it is for corporations. returns as opposed to riskier projects with higher expected returns the long-run intrinsic value of the firm. low potential ested in serving its owners should be to maximize 2. Economic value added and market value added are two ways to measure managerial performance. Which of following statements about economic value added (EVA) is correct? One way to increase EVA is to achieve the same level of operating income, but with less investor-supplied capital. the a. b. If a firm reports positive net income, its EVA must also be positive. c. One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free. d. EVA measures managerial performance since the inception of the firm, while MVA focuses on the effectiveness during a specific year.

Explanation / Answer

1.d. The primary operating goal of a publicly-owned firm interested in serving its owners should be to maximize the long-run intrinsic value of the firm.

2. a. One way to increase EVA is to achieve the same level of operating income, but with less investor-supplied capital.

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