Given the Goal of Maximization of Firm Value and Shareholder

question 19

Essay

Given the goal of maximization of firm value and shareholder wealth,we have stressed the importance of net present value (NPV).And yet,some financial decision-makers continue to use less desirable measures such as the payback method.Why do you think this is the case?

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Definitions:

Carrying Cost

Expenses incurred by holding inventory or assets, including storage, insurance, and spoilage costs.

Fixed Cost

Business expenses that remain constant regardless of the volume of goods or services produced, such as rent, salaries, and insurance premiums.

Switch Break-Even Point

This term refers to the point at which the cost savings or revenue from changing a system or product equals the costs associated with the change.

Variable Cost

Charges that fluctuate according to the volume of production.