CASE 1 (20 points)

We claim that the goal of the firm is to maximize current market value. Could the following actions be consistent with that goal? Explain.

a.The firm adds a cost-of-living adjustment to the pensions of its retired employees.

b.The firm reduces its dividend payment, choosing to reinvest more earnings in the business.

c.The firm buys a corporate jet for its executives.

d.The firm drills for oil in a remote jungle. The chance of finding oil is only 1 in 5.

Instructions:

Justify your opinion on each of four statements above(5 points per each of a, b, c, d).