Question

The overall goal of capital budgeting projects should be to:

decrease the firm's reliance on debt.

increase the firm's sales.

increase the firm's outstanding shares of stock.

When a corporation fails, the maximum that can be lost by an individual shareholder is:

the amount of their initial investment.

the amount of their share of the profits.

their proportionate share required to pay the corporation's debts.

the amount of their personal wealth.

increase the wealth of the firm's shareholders.

When the management of a business is conducted by individuals other than the owners, the business is most likely to be a:

corporation.

sole proprietorship.

partnership.

general partner.

When managers' compensation plans are tied in a meaningful manner to the value of the firm, agency problems:

can be reduced.

will be created.

are shifted to other stakeholders.

are eliminated entirely from the firm.

Answer 1

(1) increase the wealth of the firm's shareholders.

reason- it is the process of allocating resources for major capital, or investment , expenditures. one of the primary goals of capital budgeting investment is to increase the value of the firm to the shareholders. these methods use the incremental cash flow from each potential investment or project.

(2) the amount of their initial investment

reason - agreement expires after 10 years. so when a corporate fails , the maximum that can be lost by an investor protected by limited liability is the amount of the initial investment . the amount of the profit on the investment.

(3) corporation

(4) can be reduced