b.Profits over period of time
The traditional approach ignored these important points.
3.Social Responsibility is one of the most important objectives of many firms.Big corporates make an effort towards giving back something to the society.The big companies use a certain amount of the profits for social causes.It seems that the traditional approach did not consider this point. Modern Approach is about the idea of wealth maximization.This involves increasing the Earning per shareof the shareholders and to maximize the net present worth. Wealth is equal to the the difference between gross presentworth of some decision or course of action and theinvestment required to achieve the expected benefits. Gross present worth involves the capitalised value of the expected benefits.This value is discounted a some rate,thisrate depends on the certainty or uncertainty factor of the expected benefits. The Wealth Maximization approach is concerned with theamount of cash flow generated by a course of action rather than the profits. Any course of action that has net present worth above zero or in other words,creates wealth should be selected