The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

Maximize managers' own interests, which are by definition consistent with maximizing shareholders' wealth.

Since it is impossible to measure a stock's intrinsic value, the text states that it is better for managers to attempt to maximize the current stock price than its intrinsic value.

Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers.

Maximize the firm's expected EPS, which must also maximize the firm's price per share.

Minimize the firm's risks because most stockholders dislike risk. In turn, this will maximize the firm's stock price.

Expert Solution

Maximize the Firm's expected EPS, which must also maximize the firm's price per share

Maximizing the Firm's expected EPS (Earning Per Share) which is also intrinsic value of share is primary goal of publicly owned firm because its maximize the shareholder's wealth.

Manager's can do all the activities which maximize the shareholder's wealth without putting manager's interest first.

jeff jeffy answered 2 years ago

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