The Major,overall Argument Against the "Marginal Principle of Retained Earnings

question 106

Multiple Choice

The major,overall argument against the "marginal principle of retained earnings" is:

• A) the uncertainty surrounding capital investment projects.
• B) the lack of ability to adequately measure corporate investment returns.
• C) the diversity of shareholders and their potential investment returns.
• D) its failure to consider shareholder preferences.

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Definitions:

Annual Cash Inflows

The total amount of money, often from sales, investments, or financing, that flows into a company over a year.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument, in order to determine its present value.

Salvage Value

The expected end-of-life residual value of an asset.

Net Present Value

Net present value is the calculation to determine the present value of a series of future cash flows minus the initial investment cost, used to assess the profitability of investments.