6-1 What are the three principal forms of business organization? What are the advantages and disadvantages of each?

What does it mean to maximize the value of a corporation?

6-3 Should stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action would probably increase the firms stock price from a current level of $20 to $25 in six months and then to $30 in five years, but another action would probably keep the stock at $20 for several years, but then increase it to $40 in five years, which action would be better? Can you think of some specific corporate actions that might have these general tendencies?

6-4 Would the management of a firm in an oligopolistic industry or in a competitive industry be more likely to engage in socially conscious practices? Explain your reasoning.

6-5 What is the difference between stock price maximization and profit maximization? What conditions might promote profit maximization

6-6 If you were the president of a large, publicly owned corporation, would you make decisions to maximize stockholders welfare or your own personal interests? What are some actions that stockholders can take to ensure that managements interests and those of stockholders coincide? What are some other factors that might influence managements actions?

6-7 The president of United Semiconductor Corporation made this statement in the companys annual report: Uniteds primary goal is to increase the value of the common stockholders equity over time. Later in the report, the following announcements were made a. The company contributed $1.5 million to the symphony orchestra in San Francisco, its headquarters city. b. United is spending $500 million to open a new plant in Mexico. No revenues will be produced by the plant for four years, so earnings will be depressed during this period versus what they would have been had the company not opened the new plant. c. The company is increasing its relative use of debt. Assets were formerly financed with 35 percent debt and 65 percent equity; henceforth, the financing mix will be 5050. d. The company uses a great deal of electricity in its manufacturing operations, and it generates most of this power itself. United plans to utilize nuclear fuel rather than coal to produce electricity in the future. e. The company has been paying out half of its earnings as dividends and retaining the other half. Henceforth, it will pay out only 30 percent as dividends. Discuss how Uniteds stockholders, customers, and labor force would react to each of these actions and describe how each action might affect Uniteds stock price.

6-8 Why do U.S. corporations build manufacturing plants abroad when they could build them at home?