Normally a C Corporation Shareholder Would Prefer to Receive a Return

question 10

Essay

Normally a C corporation shareholder would prefer to receive a return of capital distribution (e.g., stock redemption) rather than a dividend distribution. Provide an example of where the opposite is true.

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Definitions:

Zero-Profit Equilibrium

A situation in competitive markets wherein, due to free entry and exit, firms only earn a normal profit, which is their lowest level of profit necessary to keep them in business.

Industry Expands

The process of a sector growing in size through increased production, possibly due to higher demand or technological advancements.

AVC

Average Variable Cost, which is the variable cost per unit of output, calculated by dividing total variable costs by the quantity of output.

ATC

Average Total Costs, which is the sum of all production costs (fixed and variable) divided by the quantity of output produced, detailing the average cost per unit of output.