The objective of maximizing shareholder wealth, as measured by the market value of the firm's stock, _____.
A) does not consider the timing of the benefits received
B) provides a way to consider the risk of the benefits expected
C) benefits only certain stockholders
D) does not provide a standard against which to judge actual decisions

Question

Quizplus · Accepted Answer

Maximizing shareholder wealth inherently involves considering the risk of expected benefits because the market value of a firm's stock reflects both the magnitude and the riskiness of future cash flows to the shareholders. Higher risk decreases the value of these expected cash flows, thus affecting the stock's market value.

The Objective of Maximizing Shareholder Wealth, as Measured by the Market