The Marginal Principle of Retained Earnings Means That Each Potential

question 92

Multiple Choice

The marginal principle of retained earnings means that each potential project to be financed by retained earnings must:

• A) provide a higher rate of return than the shareholders can achieve after paying taxes on the distributed dividends.
• B) yield a return equal to or greater than the marginal cost of capital.
• C) provide enough return to pay the corporation's marginal tax rate.
• D) have an internal rate of return greater than the corporate growth rate of dividends.

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Definitions:

Reaction

A chemical reaction involves the transformation of one or more substances into different substances through the breaking and forming of chemical bonds.

Organic Product

A compound or material which results from the transformation of organic precursors in a chemical reaction, usually in organic synthesis.

Reaction

A process in which substances, the reactants, transform into different substances, the products.

Conversion

The process of changing something into a different form or substance, often used in the context of chemical reactions.