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Question 1 (10 marks, 5 marks for each part) Write a short essay of XXXXXXXXXXwords for each of the following questions. For each question, illustrate with an appropriate example in your answer. a....

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Question 1 (10 marks, 5 marks for each part)
Write a short essay of XXXXXXXXXXwords for each of the following questions. For each question, illustrate with an appropriate example in your answer.
a. Explain why ‘maximisation of shareholder wealth’ is an important concept in the field of finance. In your answer, contrast this concept with the notion of ‘maximisation of profit’.
. ‘Evaluating mutually exclusive projects using the IRR and NPV approaches can be problematic’. Discuss this statement
Answered Same Day Apr 05, 2020

Solution

Abr Writing answered on Apr 06 2020
138 Votes
Solution 1
Shareholders are the basic owner of the company. These are those individuals who have purchased the shares of the company which showcases their ownership rights. In the capitalist society, the main aim of the shareholder is focused towards enhancing their wealth in the company. Wealth here in the general sense represents the meaning that business manager in order to maximize the overall wealth is trying to enhance the prices of the share in the external market. As in case prices of the shares rise up ultimately net-worth of the shareholder also increases. This also impacts on the overall value of the firm.
The concept of wealth maximization is the modern and advanced approach to deal with financial management. The particular approach is superior as in comparison to the concept of profit maximization. This approach is better in objective as in comparison to the maximization of profit approach as wealth maximization things about the more extensive field. Value or wealth of a business organization is characterized is the cost price of the share prevailing in the external market or capital contributed by investors (Jones & Felps, 2013).
Financial or Fund managers are considered agents of the business investors and their overall job is to take care regarding the interest of the investors. The target of overall investors or shareholder is to attain decent profit or returns on the capital invested by them along with the safety of their investment.
Both above-mentioned goals of investment safety and higher Returns are very much solved by the technique of wealth maximization as an overall criterion in decision making regarding businesses.
On the other...
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