A Manager Should Attempt to Maximize the Value of the Firm

question 56

Multiple Choice

A manager should attempt to maximize the value of the firm by:

• A) changing the capital structure if and only if the value of the firm decreases.
• B) changing the capital structure if and only if the value of the firm increases to the benefit of the stockholders.
• C) changing the capital structure if and only if the value of the firm increases only to the benefits the debtholders.
• D) changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.
• E) changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.

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Definitions:

PSD Area

A designated zone under the Prevention of Significant Deterioration program, aimed at controlling air pollution while allowing for economic growth.

Pollutants

Substances introduced into the environment that cause harm or discomfort to organisms, including chemicals, waste materials, and toxic gases.

Clean-up Cost Liability

The legal responsibility for the expenses associated with the removal and remediation of environmental pollution.

Bubble Concept

A business or economic idea that suggests a potentially unrealistically high valuation of an asset or business sector, which may lead to a burst or sudden decline.