D 1. The primary operating goal of a publicly owned firm interested in serving its stockholders should be to a. Maximize its expected total corporate income Maximize its expected EPS C. Maximize the chance of losses d Maximize the stock price per share over the long run, which is the stock's intrinsic value e. Maximize the stock price on a specific target date 2. Which of the following statements is CORRECT? a. If a corporation elects to be taxed as on 5 corporation, then both it and its stockholders can avoid all Federal taxes. This provision was put into the Federal Tax Code in order to encourage the formation of small businesses. b. The more capital a firm is likely to require, the smaller the probability that it will be organized as a corporation c. It is generally easier to transfer one's ownership interest in a partnership than in a corporation d. One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt. This problem would be avoided if you formed a corporation to operate the business e Corporate Shareholders are exposed to unlimited liability, but this factor is offset by the tex advantages of incorporation 3. Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders Decrease the use of restrictive covenants in bond agreements b. Take actions that reduce the possibility of a hostile takeover Elect a board of directors that allows managers greater freedom of action d. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cosh salaries Eliminate a requirement that members of the board of directors have a substantial investment in the fin's stock C