University of the West Indies
Department of Management Studies
MS61T Corporate Finance
Overview of Financial Management - Chapter 1
1-3
1-5
1-6 - Would the management of a firm in an oligopolistic or in a competitive industry be more likely to engage in what might be called "socially conscious" practices? Explain your reasoning.
1-7 - What's the difference between stock price maximization and profit maximization? Under what conditions might profit maximization not lead to stock price maximization?
1-8 - If you were the president of a large, publicly owned corporation, would you make decisions to maximize stockholders' welfare or your own personal interests? What are some actions stockholders could take to ensure that management's interests and those of stockholders coincided? What are some other factors that might influence management's actions?
1-9
1-10 - Assume that you are serving on the board of directors of a medium-sized corporation and that you are responsible for establishing the compensation policies of senior management. You believe that the company's CEO is very talented, but your concern is that she is always looking for a better job and may want to boost the company's short -run performance (perhaps at the expense at long-run profitability) to make herself more marketable to other corporations. What effect would these concerns have on the compensation policy that you put in place?
1-11 - If the overall stock market is extremely volatile, and if many analysts foresee the possibility of a stock market crash, how might these factors influence the way corporations choose to compensate their senior executives?
1-13