Given the Goal of Maximization of Firm Value and Shareholder

question 66

Essay

Given the goal of maximization of firm value and shareholder wealth,we have stressed the importance of net present value (NPV). And yet,many financial decision-makers at some of the most prominent firms in the world continue to use less desirable measures such as the payback period and the average accounting return (AAR). Why do you think this is the case?

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Definitions:

Purchase Agreement

A legal contract outlining the terms and conditions of the sale and purchase of goods, services, or property between two parties.

Reciprocal Arrangements

Agreements between two or more parties where benefits, services, or goods are exchanged mutually to the advantage of all involved.

Organizational Buying Behavior

The decision-making process that organizations use to establish the need for products and services and identify, evaluate, and choose among alternative brands and suppliers.

Industrial Espionage

The act of illegally and clandestinely obtaining confidential business information about a competitor for a competitive advantage.