Which of the following is NOT a reason that a firm that maximizes profits may fail to maximize shareholder wealth.
A) The timing of profits matters.Shareholders might prefer lower profits that arrive sooner.
B) Risk matters.Shareholders are risk averse,so they prefer less risky investments that generate lower profits.
C) Shareholder wealth depends on cash flow which is not the same as profit.
D) If a firm maximizes profits by engaging in unethical business practices,it's stock price may be adversely affected.
Correct Answer:
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