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Is profit maximization the proper goal of the firm

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Reference no: EM132802597

Consider the following: A firm is facing 2 alternative strategies:

Strategy 1: Use current funds to generate $400 million in cash profits (i.e. profits are 100% cash, thus there were no credit sales). Currently 100 million shares outstanding.

Strategy 2: Issue another 100 million shares & use the funds to invest in a project to generate another $100 million in profits.

problem A. Which strategy should the firm pursue? What are total profits, total number of shares, and profit per share under each strategy? Why?

problem B. Is profit maximization the proper goal of the firm?

problem C. Does the above illustrate this? How?

Reference no: EM132802597

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