When SW International Declared a Dividend of $20,000,000, Its Market

question 31

Multiple Choice

When SW International declared a dividend of $20,000,000, its market value increased from $8 billion to $8.5 billion. However, it lost a chance to reinvest $20,000,000 in the research and development of a new product which would have earned a profit of $200 million. Thus, this $200 million is referred to as SW International's

• A) producer surplus.
• B) consumer surplus.
• C) opportunity cost.
• D) social cost.

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Definitions:

High-Dividend Policy

A corporate strategy focusing on paying out a large portion of its earnings to shareholders in the form of dividends.