Which of the following actions is LEAST likely to increase shareholder wealth?
A. The weighted average cost of capital is decreased by a recent financing decision
B. The financial rewards of directors are linked to increasing earnings per share
C. The board of directors decides to invest in a project with a positive NPV
D. The annual report declares full compliance with the corporate governance code
Which of the following statements is correct?
A. One of the problems with maximising accounting profit as a financial objective is that accounting profit can be manipulated
B. A target for a minimum level of dividend cover is a target for a minimum dividend payout ratio
C. The welfare of employees is a financial objective
D. One reason shareholders are interested in earnings per share is that accounting profit takes account of risk
Which of the following statements concerning profit are correct?
1 Accounting profit is not the same as economic profit
2 Profit takes account of risk
3 Accounting profit can be manipulated by managers
A. 1 and 3 only
B. 1 and 2 only
C. 2 and 3 only
D. 1, 2 and 3
HDW Co is a listed company which plans to meet increased demand for its products by buying new machinery costing $5 million.
This investment will increase production capacity by 9,000 units per year and all of these units are expected to be sold as they are produced.
The net present value of the planned purchase of the new machinery using a nominal (money terms) approach is $4·161 million.
Required:
Identify TWO financial objectives of a listed company such as HDW Co and discuss how each of these financial objectives is supported by the planned investment in new machinery.
(6 marks)