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
Problem: Cash Flow Analysis For the attached Gantt chart, the following information is available: Invoices are sent at the end of each month. Mark up is 20% on each invoi

1. Find the price of the following bonds. They are all risk-free, and the risk-free rate is 10%. (a) A fifteen-year zero coupon bond with face value $1,000. (b) A three year

Disadvantages of Floatation of New Shares 1. The cost of getting a quotation is high, mainly when a new issue of shares is completed and the company is small. It means that su

Mr. de Ville, the owner of Tasman Ian de Ville Holdings Ltd. (TIDH) has asked you to evaluate five investment projects. TIDH has a $10,000,000 investment budget, an investment hurd

Capital Market - Financial Markets These are markets for long term funds along with maturity time of more than one year. As like of financial instruments required here are deb

Volpe Corporation produces class rings to sell to college and high school students. These rings sell for $75 each, and cost $30 each to produce. Volpe Corporation has fixed costs o

Incentive Problem and Consumption of Perquisites Incentive Problem Managers may have fixed salary and they may have no incentive to work hard and maximize shareholders weal

What are the significant points of Fiscal Policy? Significant points of Fiscal Policy: a. Meaning of fiscal policy and why this is an significant tool into managing economic

Partnerships - Types of Business Organisations Defination "The relationship, that exists with persons carrying on a business in common by a view of profit." Formati