|The long-run goal of the firm is to-
||Maximize shareholder wealth.
|Maximizing shareholder wealth means maximizing the-
||Market value of the firm’s common stock.
|Advantage of the corporation include-
||* Transferability of ownership.* Ability of the corporation to raise capital.
|Disadvantage of partnership are-
||* Lack of performance. * Unlimited liability.
|According to principle 3, how should investors decide where to invest their money?
||By determining if the return is more than expected given the level of risk.
|Why is it so hard to find extremely profitable projects?
||* If an industry is generating large profits, then new entrants are attracted, driving down profits. * To find profit projects, the product or service must be differentiated and/or have a cost advantage over the competition. *To find high profit projects, you must locate imperfections in the market that are not currently being taken advantage of.