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

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Definitions:

Availability Bias

A cognitive bias that causes people to overestimate the importance or frequency of information that is readily available to them.

Confirmation Error

A cognitive bias that leads individuals to favor information or interpretations that confirm their pre-existing beliefs or hypotheses.

Representativeness Bias

A cognitive bias where individuals inaccurately judge the probability of an event by comparing it to an existing prototype in their minds.

Heuristics

Heuristics represent simplified strategies or rules of thumb that individuals use to make decisions or solve problems quickly when faced with complex information or limited time.