13) The primary goal of a publicly owned corporation is to ________. A) maximize dividends per share B) maximize shareholder wealth C) maximize earnings per share after taxes D) minimize shareholder risk 14) Maximization of shareholder wealth A) represents a zero sum game in which one corporation gains at the expense of others. B) provides benefits to society as scarce resources are directed to their most productive use. C) is not a practical goal since it cannot be measured effectively. D) is achieved only if cash flows exceed accounting profits. 15) A financial manager is considering two projects A and B. A is expected to add $2 million to profits this year while B is expected to add $2 million to profits this year while B is expected to add $1 million to profits this year. Which of the following statements is most correct? A) The manager should select project A because it maximizes profits. B) The manager should select the project that maximizes long-term profits not just one year of profits. C) The manager should select project A or he is irrational. D) The manager should select the project that causes the stock price to increase the most which could be A or B. 16) Shareholder wealth maximization means A) maximizing earnings per share. B) maximizing dividends per share. C) maximizing the price of existing common stock. D) maximizing stockholders equity. 17) The goal of the firm should be A) maximization of profits (net income per share). B) maximization of shareholder wealth. C) maximization of market share. D) maximization of sales. 18) Which of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth? A) profit maximization B) risk minimization C) maximization of the total market value of the firm’s common stock D) none of the above 19) Which of the following is the most important goal that a corporation should strive for? A) Maximize current profits. B) Maximize market share. C) Maximize revenue. D) Maximize shareholder wealth. 20) One of the causes of the recent financial crisis in the United States has been excessive risk taking due to underestimation of risk. HOw does this relate to financial leverage? Can overestimation of risk also be detrimental? 21) Documents uncovered after the Exxon Valdez oil spill in Alaska revealed that Exxon could have used double-hulled oil tankers that would have prevented the spill but the cost of refitting their fleet of single-hulled tankers was considered too high. Exxon determined that the cost of cleaning up an oil spill would be less than the cost of refitting the ships thus increasing shareholder value. Several years after the oil spill however Exxon was fined billions of dollars for the spill. How do the costs of the clean up and the fines pertain to a discussion of maximizing shareholder value and ethical responsibility?
