​John Wants to Buy a New Lawn Mower

question 45

Multiple Choice

​John wants to buy a new lawn mower.He can either buy it in the US and pay $500 or buy it in Mexico and pay 8188 Mexican Pesos.At the exchange rate of 1 Mexican Peso=0.771US$,ignoring any other costs,he would

• A)​Prefer buying in the US
• B)Prefer buying in Mexico
• C)Be indifferent about where he buys his television
• D)​None of the above

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Definitions:

Homemade Dividend Policy

A strategy in which investors create their own dividend policy by selling a portion of their portfolio of equities.

Residual Dividend Approach

A method used by companies to determine the dividend payments based on the residual or leftover earnings after all operational and investment costs have been met.

Regular Cash Dividend

is a fixed amount paid per share to shareholders, typically on a quarterly basis, from a company's earnings.

Residual Dividend Approach

A policy for setting a company's dividend payment, where the dividend paid is based on earnings minus funds the firm retains to finance the equity portion of its capital budget.