The Reason Why Maximizing Share Value and Maximizing EPS Do

question 185

Multiple Choice

The reason why maximizing share value and maximizing EPS do not give the same optimal capital structure is because ________.

• A) EPS maximization does not consider risk
• B) share value maximization does not consider risk
• C) EPS maximization considers cash flows
• D) EPS maximization does consider risk

---

Definitions:

Acquired Drives

Secondary drives that are learned through conditioning, such as desire for money or achievement, rather than primary drives like hunger or thirst.

Hull's Model

A theoretical framework in psychology developed by Clark L. Hull, which attempts to explain learning and motivation by focusing on a systematic theory of behavior.

Excitatory Potential

The likelihood that a specific event will elicit a specific response.

Drive Reduction

A theory of motivation suggesting that behaviors are motivated by the desire to reduce internal states of tension.