If Firm's Objective Is to Maximize Wealth

question 74

Multiple Choice

If firm's objective is to maximize wealth,

• A) the rule of the Profitability Index will always give you the correct answer.
• B) the rule of the Net Present Value will always give you the correct answer.
• C) the rule of the Payback Period will always give you the correct answer.
• D) the rule of the Internal Rate of Return will always give you the correct answer.

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and goods, used to fund a company or produce more wealth.

Permanent Investment

Investments a company intends to hold for a long duration, typically exceeding one year, for earning dividends or interest income.

Owner's Equity

The total value remaining in a business after all liabilities are subtracted from assets; also known as shareholders' equity.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the owner's claim against the company's assets.