Essay on Sdfg

204327 Words Feb 3rd, 2016 818 Pages
Solutions Manual

Solutions Manual
Corporate Finance
Ross, Westerfield, and Jaffe
10th edition
01/30/2013
Prepared by:
Joe Smolira
Belmont University

1
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Solutions Manual

CHAPTER 1
INTRODUCTION TO CORPORATE
FINANCE
Answers to Concept Questions
1.

In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of
…show more content…
A classic (and highly relevant) thought question that illustrates this debate goes something like this: “A firm has estimated that the cost of improving the safety of one of its products is $30 million. However, the firm believes that improving the safety of the product will only save $20 million in product liability claims. What should the firm do?”

5.

The goal will be the same, but the best course of action toward that goal may be different because of differing social, political, and economic institutions.

6.

The goal of management should be to maximize the share price for the current shareholders. If management believes that it can improve the profitability of the firm so that the share price will exceed $35, then they should fight the offer from the outside company. If management believes that this bidder or other unidentified bidders will actually pay more than $35 per share to acquire the company, then they should still fight the offer. However, if the current management cannot increase the value of the firm beyond the bid price, and no other higher bids come in, then management is not acting in the interests of the shareholders by fighting the offer. Since current managers often lose
2

© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in

Related Documents