Question

The goal of “maximization of the shareholders’ wealth” is an adequate goal for a project. Do you agree? If you don’t, explain your justification.

Can you comment on this topic at least 5 pages on MS Word? Thanks.

Answer 1

The goal of maximization of shareholders wealth is an adequate goal for a project because it will help in selection of all those projects, whose rate of return is higher than the cost of capital, and such products will help in maximization of the value of the shareholders in the long run.

The project should be selected after consideration of the long run because profit maximization is always preferred in the short term but it can have negative impact in the long run because of reduction in the overall volume and the market sentiment because if the company is not following up with the ethical standards, to maximize the overall rate of return for the shareholder, it will be facing a lot of resistance from other stakeholders in the long run.

the company should always be focusing on maximization of the overall company value rather than the profit maximization because the overall value maximization is aimed at enhancement of long-term prospect of the company whereas profit maximization is a narrow concept is an is always focus the short-term view of the company.

so a project should always be selected after keeping in various perspective in to remind which will incorporate the value maximization philosophy, and it will help in maximization of the overall value of the company and market capitalisation in the long run, and it will also be ethical in nature as it is not just focusing on the profit maximization which is a highly narrow concept.