Question

True or False

1. The primary goal of a corporation is profit maximization.

2. Typically, shareholders are not equity investors.

3. Calculating a present value is a tool we can use to help compare and contrast different investment choices we may have today.

4. When considering a capital structure you are making a choice between debt and equity financing.

Answer 1

Answer:

Q1. The primary goal of a corporation is profit maximization - False, as the primary goal of a corporation is wealth maximization. Profit maximization is a short term goal but the main goal is to increase the value of the organization by maximizing the wealth.

Q2. Typically, shareholders are not equity investors - True, Shareholders are the persons who owns shares of stock in a company. Shareholders can be equity investors or preferred share holder.

Q3. Calculating a present value is a tool we can use to help compare and contrast different investment choices we may have today - False.  If we have different investment options available today then we can compare their today's value. Today's value is the present value so, there is no need of calculating present value. Whereas if we have different investment options and their future returns are given then we need to calculate the present value to select the best option.

Q4. When considering a capital structure you are making a choice between debt and equity financing - True. This is true because capital structure means the proportion of debt financing and equity capital financing in a firm.