Which One of the Following Statements Is Correct Concerning Dilution

question 41

Multiple Choice

Which one of the following statements is correct concerning dilution related to a new project?

• A) As long as the book value of a firm increases when a project is undertaken, the book value per share will remain constant.
• B) As long as the market value of a firm increases when a project is undertaken, the market value per share will increase.
• C) Even if the market value of a firm increases when a project is undertaken, the market value per share can decrease.
• D) The proportionate ownership of each shareholder always remains constant when new projects are taken on.
• E) The market price per share of stock tends to increase when the net present value of a project that is taken on is negative.

---

Definitions:

Utility Function

A mathematical representation that ranks consumer preferences over a set of goods or services, often leading to an optimal choice.

Consumption

The usage of goods and services by households or individuals, forming a major component of aggregate demand in an economy.

Income

Income refers to the money received by an individual or entity, typically in the form of wages, salaries, or returns from investments, over a specified period of time.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.