Shareholders'' wealth maximization, Finance Basics

Shareholders' wealth maximization - Objectives of Business Entity

Shareholders' wealth maximization refers to maximization of the total present value of each decision made in the firm.  Net current value is identical to the difference among the present value of benefits received from a decision and the present value of the price of the decision. 

A financial action along with a positive net present value will maximize the wealth of the shareholders, at the same time as a decision along with a negative net present value will deduct the wealth of the shareholders. Below this goal, a firm will just take those decisions such result in a positive net present value.

Shareholder wealth maximization assists to solve the problems with profit maximization.  This is since, the goal as:

  • Considers time value of money via discounting the expected future cash flows to the present.
  • It recognizes risk via using a discount rate that is a measure of risk to discount the cash flows to the present.
Posted Date: 1/29/2013 1:16:26 AM | Location : United States







Related Discussions:- Shareholders'' wealth maximization, Assignment Help, Ask Question on Shareholders'' wealth maximization, Get Answer, Expert's Help, Shareholders'' wealth maximization Discussions

Write discussion on Shareholders'' wealth maximization
Your posts are moderated
Related Questions
Question 1: a) What is dependency ratio and why is it important for pensions? b) For which types of schemes is dependency ratio mostly relevant? Explain c) What is the

Basic economic order quantity (EOQ) model  This model is one of the oldest and most commonly used in inventory control. It is based on a number of assumptions:  The dem

capital structure of 38% common stock and 62% debt. A debt issue of 1000 par value, 5.6% bonds that mature in 15 years and pay annual interest will sell for $979.dividends have gro

i ordered case study 1 susam and malcom. when i open the document is completely different, not the same case study an is only relivent in the usa not australia... do you have the c

Contracting Cost - Agency Costs These are costs acquired in devising the contract between the shareholders and managers. The contract is drawn to ensure management act in t

ROE - Return on Equity The average of the industry ROE was 21.38% for 2004, 24.99% for 2005, and 23.56% for 2006. The chart showed that after the acquisition of IBM PC di

1) Calculate the yield to maturity of a 7-year $1,000 par value bond with an annual coupon rate of 7.5% and a current price of $1,125. Provide the spreadsheet solutions for both an

How often does the "on the run" tsy change?

Private Limited Companies These are NOT permitted to advertise their shares so like to attract public money and so that they sell their shares privately as recognized as priva

Investment Opportunity and Capital Structure Investment Opportunity Lack of suitable investment opportunities, that is so, by positive returns or N.P.V., may encourage a