【正文】 the drilling appears to be a bad bet, with a low probability of success, the project may be valuemaximizing if a successful oute (although unlikely) is potentially sufficiently profitable. A oneinfive chance of success is acceptable if the payoff conditional on finding an oil field is 10 times the costs of exploration. Est time: 06–10 21. a. Increased market share can be an inappropriate goal if it requires reducing prices to such an extent that the firm is harmed financially. Increasing market share can be part of a wellreasoned strategy, but one should always remember that market share is not a goal in itself. The owners of the firm want managers to maximize the value of their investment in the firm. b. Minimizing costs can also conflict with the goal of value maximization. For example, suppose a firm receives a large order for a product. The firm should be willing to pay overtime wages and to incur other costs in order to fulfill the order, as long as it can sell the additional product at a price greater than those costs. Even though costs per unit of output increase, the firm still es out ahead if it agrees to fill the order. c. A policy of underpricing any petitor can lead the firm to sell goods at a price lower than the price that would maximize market value. Again, in some situations, this strategy might make sense, but it should not be the ultimate goal of the firm. It should be evaluated with respect to its effect on firm value. d. Expanding profits is a poorly defined goal of the firm. The text gives three reasons: (i) There may be a tradeoff between accounting profits in one year and accounting profits in another year. For example, writing off a bad investment may reduce this year’s profits but increase profits in future years. Which year’s profits should be maximized? Chapter 01 Goals and Governance of the Corporation 17 169。 2020 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 12. Takeover defenses increase the target firm’s agency problems. One of the mechanisms that stockholders rely on to mitigate agency problems is the threat that an underperforming pany (with an underperforming management) will be taken over by another pany. If management is protected against takeovers by takeover defenses, it is more likely that managers will act in their own best interest, rather than in the interests of the firm and its stockholders. Est time: 01–05 13. Both capital budgeting decisions and capital structure decisions are longterm financial decisions. However, capital budgeting decisions are longterm investment decisions, while capital structure decisions are longterm financing decisions. Capital structure decisions essentially involve selecting between equity financing and longterm debt financing. Est time: 01–05 14. A bank loan is not a ―real‖ asset that can be used to produce goods or services. Rather, a bank loan is a claim on cash flows generated by other activities, which makes it a financial asset. Est time: 01–05 15. Investment in research and development creates knowhow. This knowledge is then used to produce goods and services, which makes it a real asset. Est time: 01–05 16. The responsibilities of the treasurer include the following: supervising cash management, raising capital, and banking relationships. The controller’s responsibilities include supervision of accounting, preparation of financial statements, and tax matters. The CFO of a large corporation supervises both the treasurer and the controller. The CFO is responsible for largescale corporate planning and financial policy. Est time: 01–05 Chapter 01 Goals and Governance of the Corporation 15 169。 2020 by McGrawHill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Est time: 01–05 3. Separation of ownership and control for public corporations means that the ultimate owners of the corporation are not its managers. These same managers will consider their own interest as well as shareholders when making decisions. This creates agency problems. Est time: 01–05 4. Money markets, where shortterm debt instruments are bought and sold. Foreignexchange markets: Most trading takes place in overthecounter transactions between the major international banks. Commodities markets for agricultural modities, fuels (including crude oil and natural gas), and metals (such as gold, silver, and platinum). Derivatives markets, where options and other derivative instruments are traded. Est time: 01–05 5. Buy shares in a mutual fund. Mutual funds pool savings from many individual investors and then invest in a diversified portfolio of securities. Each individual investor then owns a proportionate share of the mutual fund’s portfolio. Est time: 01–05 Chapter 01 Goals and Governance of the Corporation 112 169。Chapter 01 Goals and Governance of the Corporation 11 169。 and pollution and gasoline mileage requirements imposed on automobile manufacturers. Est time: 06–10 34. Some customers might consider this practice uhical. They might view the firm as gouging its customers during heat waves. On the other hand, the firm might try to convince customers that this practice allows it to charge lower prices in cooler periods and that over long periods of time, prices even out. Whether customers and firms have an ―implicit co