Suppose a Firm Has $100 Million in Excess Cash

question 26

Multiple Choice

Suppose a firm has $100 million in excess cash. It could

• A)invest the funds in projects with positive NPVs.
• B)pay high dividends to the shareholders.
• C)buy another firm.
• D)do all of the options.

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Definitions:

Net Operating Income

The profit generated from a company's core business operations, excluding deductions for interest and taxes.

Contribution Approach

An accounting method where all variable costs are subtracted from sales to find the contribution margin, which is then used to cover fixed costs and profits.

Cost Formula

An equation used to predict costs, often relating total costs to the level of activity or volume of output.

Selling

The process of promoting and exchanging goods or services for money.