Corporation Finance

Chap. 1
1. The single overriding goal of the firm is to maximize the firm’s common stock price. Also referred to as stockholder wealth maximization.

2. Agency Theory – the role of managers versus owners of the companies.
Problems:
1. Do executives consume excessively on unneeded things such as airplanes & golfing?
2. Do managers avoid risks, which stockholders can diversify against.
3. Do managers fight off takeover bids?
Remedies:
1. Make the managers care about the stock price. Compensation tied to stock price performance. –Good idea to look for when buying a stock.

3. V = f (I, F...