Breckner Gas Company Faces a Demand for Their Gas Given

question 27

Multiple Choice

Breckner Gas Company faces a demand for their gas given by P = 30 - 0.25Q.It has total costs (exclusive of the required rate of return on its invested capital) of TC = -60 + 8Q + 0.75Q².If the commission that regulates Breckner determines that $100 is sufficient to compensate equity holders for their invested capital,what are the regulated price and output?

• A) P = 23.75, Q = 25.
• B) P = 25, Q = 20.
• C) P = 27.5, Q = 10.
• D) P = 22.5, Q = 30.
• E) P = 20, Q = 40.

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Definitions:

Dividend Payout Ratio

A financial metric that measures the proportion of earnings a company pays to its shareholders in the form of dividends, expressed as a percentage of its earnings.

Equity Capital

Capital acquired by a corporation in return for partial ownership of the corporation.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost liquidity.

Dividend Reinvestment Plan

A plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date.