If the Expected Rate of Return on a Share Exceeds

question 19

Multiple Choice

If the expected rate of return on a share exceeds the required rate,

• A) The share is experiencing supernormal growth.
• B) The share should be sold.
• C) The company is probably not trying to maximise price per share.
• D) The share is a good buy.
• E) Dividends are not being declared.

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Definitions:

CCA Class

A category under the Canadian tax system that determines the depreciation rate for tax purposes on capital assets.

Net Advantage

The benefit or gain that results from a specific course of action, minus any associated costs.

Resale Value

The estimated value for which an asset can be sold in the marketplace after some period of use.

Depreciation Tax Shield

A reduction in taxable income for firms, achieved through claiming depreciation expenses, thereby lowering the tax liability.