Question

250 words, in your own words Why is the goal of financial management to maximize the current value of the company’s stock? In other words, why isn’t the goal to maximize the future value?

Answer 1

The value of a share of stock depends on all of the expected future cash flows of a company. Essentially, maximizing the current share price is the same things as maximizing the future share price for any specified future period. The expected price of the stock must behigher in the future than it is today, so financial management aims to maximize the current share price since maximizing the current price should in turn lead to maximized future share prices.

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