All of the Following Are Correct Except

question 22

Multiple Choice

All of the following are correct except:

• A) Unlike debt and preferred stock, cash flows from common equity are not fixed or known beforehand and their risk is harder to evaluate.
• B) Firms have three sources of common equity, retained earnings, treasury stock, and new stock issues, and thus two costs of common equity.
• C) From the shareholders' perspective, the opportunity cost of retained earnings is the return the shareholders could earn by investing the funds in assets whose risk is similar to that of the firm.
• D) If the firm cannot invest its retained earnings to achieve a sufficient risk-adjusted return, shareholders would be better off receiving 100 percent of its net income as dividends.

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Definitions:

Frontline Managers

Supervisors or lower-level managers who are directly responsible for overseeing the work of rank-and-file employees.

Ongoing Process

A continuous, unending procedure or activity that often requires regular monitoring and updating.

Infrastructure

The basic physical and organizational structures and facilities needed for the operation of a society or enterprise, such as buildings, roads, and power supplies.

Testing System

A framework or procedure established to assess qualities, abilities, or performance through examinations or experiments.