Which of the following statements is CORRECT? a. For a stock to be in equilibriu

Question

Which of the following statements is CORRECT?

a. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price. b. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. {C} c. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers. {C} d. A good goal for a firm's management is the maximization of expected EPS. e. Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited.

Explanation / Answer

Correct option is C

Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers.  because corporation's managers may have personal goals that
compete with the owner's goal of maximization of shareholder wealth.

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