Author Question: What does it mean to maximize the value of the firm? In general, how is value created? What factors ... (Read 41 times)

Kikoku · **on:** Jul 11, 2018

What does it mean to maximize the value of the firm? In general, how is value created? What factors determine value and how does each affect the value of the firm?

What will be an ideal response?

Question 2

Jerry built a home in a flood plain. He did not purchase flood insurance. Recently, a noted meteorologist predicted torrential rains for the area for the next 7 days.

Jerry attempted to purchase flood insurance through the National Flood Insurance Program. Which flood insurance provision is likely to block Jerry's efforts to obtain coverage for protection against the predicted torrential rain?
A) waiting period
B) definition of covered flood
C) deductible
D) insurance limit

stallen · **Reply #1 on:** Jul 11, 2018

Answer to Question 1

To maximize the value of the firm most commonly means to maximize the market capitalization of the firm for shareholders. More specifically, this means to maximize the present value of expected cash flows.

Answer to Question 2

Answer: A