Suppose That There Are No Taxes, Transactions Costs, or Other

question 60

Multiple Choice

Suppose that there are no taxes, transactions costs, or other market imperfections. Which of the following actions is most likely to make shareholders better off?

• A)Increase dividends.
• B)Reduce share repurchases.
• C)Announce that dividends will not change for at least three years.
• D)Eliminate negative-NPV projects.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a situation where there is no tendency for the price to change unless external factors intervene.

Government Imposes

Measures or regulations put in place by the government that can impact various aspects of economic and social life.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a specific price over a given period of time.

Quantity Demanded

The total amount of goods or services that consumers are willing to purchase at a given price level at a specific time.