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Goal of the Firm: Maximize Profit? Which Investment is preferred? Earnings per share (EPS) Investment Year 1 Year 2 Year 3 Total for years 1,
Goal of the Firm: Maximize Profit? Which Investment is preferred? Earnings per share (EPS) Investment Year 1 Year 2 Year 3 Total for years 1, 2, and 3 $1.00 Rotor A Valve B S140 0.60 $0.40 1.40 $2.80 3.00 1.00 . Profit maximization may not lead to the highest possible share price for at least three reasons: 1. (Timing is importantthe receipt of funds sooner rather than later is preferred 2. Profits do not necessarily result in cash flows available to stockholders 3. Profit maximization fails to account for risk
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