The Fact That Flotation Costs Can Be Significant Is Justification

question 44

Multiple Choice

The fact that flotation costs can be significant is justification for

• A)maintaining a high dividend policy.
• B)maintaining a low dividend policy and rarely issuing extra dividends.
• C)maintaining a constant dividend policy even when profits decline significantly.
• D)a firm to issue larger dividends than its closest competitors.
• E)a firm to maintain a constant dividend policy even if it frequently has to issue new shares of stock to do so.

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Definitions:

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, service, or resource, usually to protect consumers.

Price Floor

A government or regulatory minimum price that must be paid for a good or service, intended to prevent prices from falling too low.

Shortage

A market condition where demand exceeds supply.

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded, often resulting in excess stock and potential price reductions.