In the shareholder wealth maximization model,the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.
A) profits (cash flows)
B) revenues
C) outlays
D) costs
E) investments

Question

Quizplus · Accepted Answer

The shareholder wealth maximization model focuses on maximizing the value of a firm's stock, which is equal to the present value of all expected future profits or cash flows. This value is discounted at the stockholders' required rate of return, which represents the minimum rate of return that investors demand for investing in the firm's stock. Therefore, choice A is the best answer. Revenues, outlays, costs, and investments are all important measures for a firm, but they do not directly determine the value of the firm's stock in the shareholder wealth maximization model.

In the Shareholder Wealth Maximization Model,the Value of a Firm's