If a Firm Cannot Invest Retained Earnings and Earn at Least

question 31

True/False

If a firm cannot invest retained earnings and earn at least the cost of equity, it should pay these funds to shareholders and let them invest directly in other assets that do provide this return.

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Definitions:

Deindividuation

A psychological state characterized by reduced self-awareness and diminished social identity, often leading to disinhibited and impulsive behavior.

Diffusion of Responsibility

A psychological phenomenon where individuals are less likely to take action or feel a sense of responsibility in the presence of a large group of people.

Just-World Hypothesis

The cognitive bias that a person's actions are inherently inclined to bring morally fair and fitting consequences to that person.

Ethnocentrism

The belief that one’s own ethnic group, nation, or religion is superior to all others.