ESSENTIALS OF CORPORATE FINANCE
17th Edition
ISBN: 9781260665857
Author: Ross
Publisher: MCG CUSTOM
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Question
Chapter 7, Problem 11CTCR
Summary Introduction
To discuss: On a statement that the managers will not focus on current stock value which leads to overemphasize on short-term profits through expenses of long-term profits.
Introduction:
Stock is a type of security in a company which denotes ownership. On issuing stocks, the company can raise capital.
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Evaluate the following:Managers should not focus on the current stock value because doing so will lead to an over emphasis on short term profits at the expense o long term profits
Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on the short term profits at the expense of long-term profits.
Explain how managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
Chapter 7 Solutions
ESSENTIALS OF CORPORATE FINANCE
Ch. 7.1 - What are the relevant cash flows for valuing a...Ch. 7.1 - Does the value of a share of stock depend on how...Ch. 7.1 - What is the value of a share of stock when the...Ch. 7.1 - What is a target price on a stock? How is it...Ch. 7.2 - Prob. 7.2ACQCh. 7.2 - Prob. 7.2BCQCh. 7.2 - Why is preferred stock called preferred?Ch. 7.3 - Prob. 7.3ACQCh. 7.3 - Prob. 7.3BCQCh. 7.3 - Prob. 7.3CCQ
Ch. 7.3 - Prob. 7.3DCQCh. 7 - Section 7.1What is the total return for a stock...Ch. 7 - Prob. 7.2CCh. 7 - LO1 7.1.Stock Valuation. Why does the value of a...Ch. 7 - LO1 7.2.Stock Valuation. A substantial percentage...Ch. 7 - Dividend Policy. Referring to the previous...Ch. 7 - LO1 7.4.PRINTED BY: V.SwathiPpfeya@spi-global.com....Ch. 7 - LO1 7.5.Common versus Preferred Stock. Suppose a...Ch. 7 - Prob. 6CTCRCh. 7 - Prob. 7CTCRCh. 7 - LO1 7.8.Dividends and Earnings. Is it possible for...Ch. 7 - Prob. 9CTCRCh. 7 - Prob. 10CTCRCh. 7 - Prob. 11CTCRCh. 7 - Prob. 12CTCRCh. 7 - Prob. 13CTCRCh. 7 - Prob. 14CTCRCh. 7 - Stock Values. Gilmore, Inc., just paid a dividend...Ch. 7 - Stock Values. The next dividend payment by Dizzle,...Ch. 7 - Prob. 3QPCh. 7 - Stock Values. Take Time Corporation will pay a...Ch. 7 - Stock Valuation. Mitchell, Inc., is expected to...Ch. 7 - Stock Valuation. Suppose you know that a companys...Ch. 7 - Stock Valuation. Burkhardt Corp. pays a constant...Ch. 7 - Valuing Preferred Stock. Smiling Elephant, Inc.,...Ch. 7 - Prob. 9QPCh. 7 - Growth Rates. The stock price of Baskett Co. is 73...Ch. 7 - Valuing Preferred Stock. E-Eyes.com has a new...Ch. 7 - Stock Valuation. Wesen Corp. will pay a dividend...Ch. 7 - Prob. 13QPCh. 7 - Prob. 14QPCh. 7 - Nonconstant Growth. Metallica Bearings, Inc., is a...Ch. 7 - Nonconstant Dividends. Hot Wings, Inc., has an odd...Ch. 7 - Nonconstant Dividends. Apocalyptica Corporation is...Ch. 7 - Supernormal Growth. Burton Corp. is growing...Ch. 7 - Negative Growth. Antiques R Us is a mature...Ch. 7 - Finding the Dividend. Gontier Corporation stock...Ch. 7 - LO3 21. PRINTED BY: V.SwathiPpreya@spi-gIobal.com....Ch. 7 - Stock Valuation. According to the 2015 Value Line...Ch. 7 - Prob. 23QPCh. 7 - Negative Growth. According to the 2015 Value Line...Ch. 7 - Prob. 25QPCh. 7 - Stock Valuation and PE. Sully Corp. currently has...Ch. 7 - Stock Valuation and PE. You have found the...Ch. 7 - Prob. 28QPCh. 7 - Stock Valuation and PE. Davis, Inc., currently has...Ch. 7 - PE and Terminal Stock Price. In practice, a common...Ch. 7 - Capital Gains versus Income. Consider four...Ch. 7 - Stock Valuation. Most corporations pay quarterly...Ch. 7 - Prob. 1CCCh. 7 - Prob. 2CC
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Similar questions
- stock? 7.11 Stock Valuation Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits. LO 2 LO 1 7.12 Constant Dividend Growth Model In the constant dividend growtharrow_forwardOne of the following decisions is not taken to increase the stock price: Select one: a. Maximize costs b. Attracting additional funds c. Maximize net income or profit d. Returning profits to owners over timearrow_forwardYou, in analyzing a stock, find that its expected return exceeds its required return. This suggests that you think a. the stock should be sold. b. the stock is a good buy. c. management is probably not trying to maximize the price per share. d. dividends are not likely to be declared. e. the stock is experiencing supernormal growth.arrow_forward
- 4. What forms of market efficiency are violated if investors overreact to good news, resulting in stock price increases followed by stock price decreases: a. Semi-strong form efficiency b. Strong-form efficiency c. Both 1 and 2 d. Neither 1 nor 2arrow_forwardWhich of the following statements regarding the PE ratio is true? O A high PE ratio is indicative of a company with questionable future earnings. The higher the PE ratio the greater the risk. O A low PE ratio reflects a company with a strong financial future. O The lower the PE ratio the greater the risk.arrow_forwardQ1. Why is some risk diversifiable and other risk is not (non-diversifiable)? Q2. Yes or no, are industries that have a high standard deviations (wide fluctuation of the price of the stock) not useful as investments? Beyond answering Yes or no, state the reason behind your choice.arrow_forward
- is(are)the reason(s) for profit maximization not a reasonable goal for firms. a. Profit concept ignores timing of the returns b. Profit concept ignores the cash flow available to stock holders c. Profit is risky and can be some times loss d. All the abovearrow_forwardp12 According to the pecking order theory, managers are less likely to use which of the following sources of financing? Retained earnings New preferred stock New common stock New debtarrow_forward“When the stock market declines the net worth of companies decreases, causing the problem of asymmetric information to decrease as well.” Is this statement true, false, or uncertain? Explain your answer.arrow_forward
- True or False Please answer both. 1. High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price. 2. When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.arrow_forward5) A company's stock price jumped when it announced that its revenue had decreased because of the quality issues of its products. This is an example of ________.A) market riskB) unsystematic riskC) systematic riskD) undiversifiable riskarrow_forwardSince stock represents ownership in the company, equity investing is less risky than debt investing, and as such we can expect lower returns. t/f?arrow_forward
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