Concept Application of Concept in the Scenario Reference to Concept in Reading
The corporate firm Bernard Lester founded Lester Electronics Inc, (LEI), which in 1984 was listed publicly and is not traded on the NASDAQ market (University of Phoenix, 2008). The organization is evaluated by a Board of Directors and faced with a decision that will directly affect the stakeholders of the company. LEI must consider the interests of these stakeholders (Board of Directors, shareholders, and management) before a decision can be made. “The goal of the corporation is to add value for stockholders. The corporate firm will attempt to maximize the shareholder’s wealth by taking actions that increase the current value per share of existing stock of the firm” (Ross, Westerfiled, & Jaffe, 2005).
Growth opportunities LEI has two options for growth of the business. Bernard Lester can merge the company with Asian-based Shang-wa or Lester can sell the company to Paris-based Avril. Lester must determine whether the future cash flows of merging with Shang-wa will be more than the current payment Avril will offer him. Either option will present growth opportunities that would impact the value per share of the organization “Many firms have growth opportunities, that is, opportunities to invest in profitable projects… these projects can represent a significant fraction of the firm’s value” (Ross, Westerfiled, & Jaffe, 2005).
Managing operating exposure As the economy globalizes, many firms such as LEI, TEC, Shang-wa and Avral Electronics are engaged in international activities such as exports, cross-border sourcing, and joint venture ...