You are running a company that is owned by stockholders. Your goal is to maximiz

Question

  You are running a company that is owned by stockholders. Your goal is to maximize shareholder value. Explain how each of the following events is likely to affect shareholder value and identify uncertainties related to their effects.

a.      Tariffs on the product you sell are reduced and you face more foreign competition.

b.      Tariffs on several of the major inputs you use to produce your product are reduced.

c.       New pollution control requirements are implemented.

d.      Inflation rates rise.

e.      A new technology is available that reduces the cost of production.

Explanation / Answer

A. decrease in sales,thus decrease in Net income and there by decreasing cash payout as dividends. B. Decrease in cogs there by increasing net Income hence increasing share holders profit. C.not directly related unless the product has got something to do with environment.In such case additional costs,there by decreasing net income and share holders profits. D.If inflation rises it means decrease in value of money.Hence decrease in profits. E.set up costs require funds.Hence it needs to sell more items till the company has break even.Rest assured it implies increase in marginal profits,hence increase in shareholders profits

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