A manager should attempt to maximize the value of the firm by:
A)changing the capital structure if and only if the value of the firm increases only to the benefit the debtholders.
B)changing the capital structure if and only if the value of the firm increases to the benefit of inside management.
C)changing the capital structure if and only if the value of the firm increases.
D)changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.
E)changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.

Question

Quizplus · Accepted Answer

A manager's goal should be to maximize the value of the firm, which is achieved by changing the capital structure when it results in an increase in the company's value. This benefits all stakeholders, including debt holders, management, and stockholders. Therefore, changes should only be made when there is a positive impact on the overall value of the firm. Choice C is the best option as it emphasizes maximizing the firm's value with no specific bias towards any stakeholder group.

A Manager Should Attempt to Maximize the Value of the Firm