Briefly discuss the following statement by providing an informed analysis of the commentsmade and including your perspective as to which is most appropriate:

All right, I accept that the objective of a firm is the maximization of its market value

to shareholders, but what does this actually mean as I am confused? Does it mean that

the firm should maximize todays share price, todays dividends, tomorrows share price,

tomorrows dividends, or alternatively the share price at some distant time in the future

when the shareholder actually decides to sell their shares? (Students should write no

more than 200 words for this question).

6

2

In the discipline of finance, we differentiate between cash flows and accounting revenues

/ expenditures in the process of analyzing time value of money and capital budgeting

issues.

Briefly discuss why we differentiate between cash flows and accounting revenues

/

expenditures, and which of the methods (cash flows or accounting net income) do we

prefer to use in finance? Justify your response. (Students should write no more than 200

words for this question).