Can a firm still achieve the maximization of shareholders' wealth even if the government has passed regulations that require pollution controls, development restrictions, and pay equity over the years? how?

Can a firm still achieve the maximization of shareholders' wealth even if the government has passed regulations that require pollution controls, development restrictions, and pay equity over the years? how?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter1: Introduction To Finance For Entrepreneurs

Section: Chapter Questions

Problem 5DQ

See similar textbooks

Related questions

Q: undermine inter-period equity?

A: Inter-period equity means the adequacy of annual inflow to pay for an annual cost. In simple terms,…

Q: A company has made the decision to finance next year’s capital projects through debt rather than…

A: Cost of debt means the expense incurred by company for usage of fund that belong to debt.

Q: Which statement about the cost of capital is incorrect? * A. If a company’s tax rate increases…

A: The weighted average cost of capital (WACC) is the sum of costs of different sources of finance…

Q: Is the claim that lower company taxes adding to investments correct or is it debatable given the…

A: The money left after expenditure is savings. Savings are used by the individuals for investment. Not…

Q: Why does WACC increase and IRR decrease as the capital budget increases? Are there any steps…

A: Because you have posted mutiple questions, we will answer only the first question and for the…

Q: Now that McCormick & Company has secured the land for the new factory through a loan, now it is time…

A: The capital asset pricing model (CAPM) is a financial approach that helps in determining the…

Q: If Congress wants to stimulate the economy, explainhow it might alter each of the following: (a)…

A: (a) If congress wants to stimulate the economy, it must reduce the personal income taxes for the…

Q: Why do companies offer stock for sale? A) the government forces them to B) they want to lay off…

A: Companies are often sells shares/stock to investors in capital market.

Q: Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an…

A: Salvage value:- The estimated resale worth of an item at the end of its useful life is known as…

Q: Do these projects contradict the goal of maximization of shareholder wealth? Why or why not?

A: The major goal of any firm is maximization of profit . In order to maximize the profit, the…

Q: Why is the study of financial management important? Offer examples of how poor financial management…

A: In case of multiple questions it is possible to solve only one question. So solving the first one.

Q: If a company has some extra cash that is lying idle and wants liquidity and safety in a government…

A: If company has excess cash in hand, it will invest in the liquid funds. So, that the company can…

Q: Consumer prices will increase

A: Correct Answer is :- A Consumer price will increase

Q: Which of the following events is most likely to encourage a firm to INCREASE the amount of debt in…

A: Stability in the business will lead to increase in long term debt

Q: How would rising interest rates, that increase the weighted average cost of capital (WACC) impact…

A: Weighted average cost of capital is the average cost of capital weighted by the proportion of the…

Q: Would a Financial Manager's role (functions) in a corporation increase or decrease in importance if…

A: Financial manager is a person who takes all the decisions related to funds for the firm by…

Q: which one is correct answer please confirm? QUESTION 28 The business risk of a firm refers to the…

A: Risk means possible outcome from unexpected events. Definition or risk element is differ from person…

Q: Suppose you are the president of a small, publicly-traded corporation. Since you believe that your…

A: The company’s expected rate to make a payment on average to its holders of the security for…

Q: 7) Which of the events described below represent systematic-risk events? (There may be more than one…

A: Systematic risk is the type of risk that has a global impact on the economy. It arises due to…

Q: Identify and explain each of the if it encourage a firm to increase or decrease debt in its capital…

A: Answer a: If there is an increase in the corporate tax rate, it would encourage a firm to increase…

Q: Much capital structure theory focusses upon minimising agency costs, taxes, and bankruptcy costs. It…

A: capital structure theory says that for any company or investment there is an optimal mix of debt and…

Q: Because many large corporations implemented ERP systems prior to 2000, what direction will growth of…

Q: Analyze why, despite employing various investment appraisal techniques, large investment projects in…

A: Capital project is the project which helps in improving and maintaining the asset, often known as…

Q: Firms often involve themselves in projects that do not result directly in profits. For example,…

A: No, these projects doesn't contradict the goal of maximization of shareholder wealth. These actions…

Q: Why does WACC increase and IRR decrease as the capital budget increases? Are there any steps…

A: As capital budget increases the firm has to raise more capital and that may be raised through equity…

Q: The government will be decreasing income taxes. To an entity producing luxury bags, it would: A.…

A: A change in income taxes results in a change in the economic growth because the disposable income of…

Q: Suppose that a new government is elected and it changes the law applying to firms to: • Allow…

A: The trade-off theory of capital structure proposes that a corporation balances costs and advantages…

Q: How can a federal budget deficit increase market equilibrium interest rates and reduce private…

A: The federal budget is the budget prepared by the government for the purpose of considering the…

Q: Let's say the government imposes a one-time, flat tax on each business operating in a fully…

A: Interest is added to loans made to individuals and businesses. The main source of revenue is this.…

Q: Analyze why, despite employing various investment appraisal techniques, large investment projects in…

A: Reasons: The main reasons are as follows, Due to improper estimation of cost and benefits of…

Q: Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an…

A: Depreciation is an expense that decreases the Net profits of the firm, Managers might reduce the…

Q: Now that McCormick & Company has secured the land for the new factory through a loan, now it is time…

A: 1) Capital Asset pricing Model is used to determine the minimum required return on the stock. It…

Q: Which of the following would reduce a firm's WACC after tax? a. A firm invests in an average-risk…

A: WACC = (weight age of equity * cost of equity ) + [(weight age of debt * cost of debt)*(1-tax rate)]…

Q: Which of the following is NOT a systematic risk? O a. The risk that the economy slows, reducing…

A: The risk that impacts the entire market altogether is known as systematic risk. Systematic risk can…

Q: What is the best explanation for the recent increase in assets held by mutual funds and other…

A: Mutual Fund is investment option where mass number of people pool their money under professional…

Q: How would an increase in corporate taxes tend to affect an average firm’s capitalstructure? What…

A: A corporate tax is a tax charged on the profits of a corporation. The personal tax is a tax charged…

Q: which of the following is an example of unsystematic risk? decrease income tax for all company soft…

A: Systematic risk are the volatility risk or market risk or undiversifiable risk, which used to affect…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

How would rising interest rates, that increase the weighted average cost of capital (WACC) impact business valuations? Would this change if the company being valued was going to receive revenue from the government spending?
which of the following is an example of unsystematic risk? decrease income tax for all company soft tech won a new sales contract increase in inflammation rate deccrease in government bond rate
Which of the following would reduce a firm's WACC after tax? a. A firm invests in an average-risk project using equity, rather than debt financing. b. A supermarket chain decides to establish hardware stores which increases its systematic risk. c. A firm issues shares and uses the proceeds to pay off a bank loan. d. A firm issues bonds and uses the proceeds to repurchase stock. e. A firm significantly improves its operating cost control to boost profits.
Is the claim that lower company taxes adding to investments correct or is it debatable given the prediction on economic growth remains negative, and can you explain why? Your advise on this is ____________________ (provide your answer and justification. Feel free to use external resources to assist you in your answer if you prefer).
If Congress wants to stimulate the economy, explainhow it might alter each of the following: (a) personaland corporate tax rates, (b) depreciation expenseschedules, and (c) the differential between the taxrate on personal income and long-term capitalgains. How would these changes affect corporateprofitability and free cash flow? How would theyaffect investors’ choices regarding which securities to hold in their portfolios? Might any of theseactions affect the general level of interest rates?
Explain intuitively how a manager could tweak the salvage value of machinery to benefit from an expected reduction in the corporate tax rate taking place towards the end of an investment. What are the shortcomings of the payback period criterion? Which of these shortcomings are accounted for in the dynamic payback period criterion? Which are not? “If a stock had high returns so far, it will have low returns in the future”. Discuss whether this statement is true or false, based on the knowledge of the different theories and models out there.
If a company has some extra cash that is lying idle and wants liquidity and safety in a government investment, what type of investment is likely to be chosen?
What are the basic arguments for increasing capital requirements at large commercial banks? In what ways will depositors, stockholders, and society in general benefit? How might each group be disadvantaged? As commercial banks enter new lines of business such as brokerage, how much additional capital should be required? Should these new lines of business be insured by the FDIC? Why or why not? Give examples from today’s financial marketplace.
How do you think that the pandemic has impacted the ability of firms to raise finance?
Is it feasible for a new company endeavor to be lucrative while still experiencing financial difficulties?
Why might a large corporation want to raise long-term capital through a borrowing money from financial institutions rather than a public offering?
What logical arguments might you use to convince your boss to forego the project despite its high rate of return? Is it possible that making investments with expected returns higher than your company’s cost of capital will destroy value? If so, how?