The Primary Objective of the Corporation: Value Maximization Maximizing the value of the firm should be the primary objective of the corporations. The market price is the stock price that we observe in the financial markets. . If the market price reflects all relevant information, then the observed price is also the fundamental, or intrinsic price. The same actions that maximize fundamental stock prices usually benefit society. Reasons include: To a large extent, the owners of stock are society. - Consumers benefit because stock price maximization requires efficient, low-cost businesses that produce high-quality goods and services at the lowest possible cost Employees benefit because companies that successfully increase stock prices also grow and add more employees, thus benefiting society Free cash flows (FCF) are the cash flows that are available for distribution to all of a firm's Investors (stockholders and creditors) after the firm pays expenses, pays taxes, and makes the necessary investments to support growth. Three factors primarily determine free cash flows: (1) sales revenues, (2) operating costs and taxes, and (3) required investments in operating capital FCF sales revenues-operating costs - operating taxes required investments in operating capital Managers can enhance their forms' values and stock prices) by increasing the size of the expected free cash flows, by speeding up their receipt, and by reducing their risk. The weighted average cost of capital (WACC) is the average return required by all of the firm's investors (stockholders and creditors). It is affected by the firm's capital structure the firm's relative amounts of debt and equity financing), interest rates, the firm's risk, the market's overall attitude toward risk. The relationship between afirm's fundamental value, its free cash flows, and its cost of capital is defined by the following equation Please Discuss this topic and post your argument by Saturday 11:59 pm to get full credit. Instructions: Discussion prompt, resource or idea/example The Primary Objective of the Corporation: Value Maximization Maximizing the value of the firm should be the primary objective of the corporations The market price is the stock price that we observe in the financial markets. . If the market price reflects all relevant information, then the observed price is also the fundamental or intrinsic price. The same actions that maximize fundamental stock prices usually benefit society. Reasons include: To a large extent, the owners of stock are society. Consumers benefit because stock price maximization requires efficient, low-cost businesses that produce high-quality goods and services at the lowest possible cost. . Employees benefit because companies that successfully increase stock prices also grow and add more employees, thus benefiting society. Free cash flows (FCF) are the cash flows that are available for distribution to all of a firm's investors (stockholders and creditors) after the firm pays expenses, pays taxes, and makes the necessary investments to support growth. Three factors primarily determine free cash flows: (1) sales revenues, (2) operating costs and taxes, and (3) required investments in operating capital FCF sales revenues operating costs operating taxes required investments in operating capital Managers can enhance their firms' values and stock prices) by increasing the size of the expected free cash flows, by speeding up their receipt, and by reducing their risk. The weighted average cost of capital (WACC) is the average return required by all of the firm's investors (stockholders and creditors). It is affected by the firm's capital structure (the firm's relative amounts of debt and equity financing, interest rates, the firm's risk, the market's overall attitude toward risk. . The relationship between a firm's fundamental value. Its free cash flows, and its cost of capital is defined by the following equation Please Discuss this topic and post your argument by Saturday 11:59pm to get full credit. Instructions: Discussion prompt, resource or idea/example Please Dost Vra nse 2-59SST