This chapter introduces the concept of present value and shows why a firm should maximize the market value of the stockholders' stake in it. The authors explain the linkage between net present values and well-functioning financial markets using two-date, certain-world framework. The concept of risk is introduced here. The importance of financial markets is emphasized. The net present value rule and the rate of return rule are explained in great detail. This chapter discusses different views on the main goal(s) of a corporation. It explains that executives from different countries have differing views on this subject.
Finally, the origins of Sarbanes-Oxley act of 2002 (SOX) are discussed.