Elkins Feed Lot Is an All-Equity Firm with Positive Net

question 30

Multiple Choice

Elkins Feed Lot is an all-equity firm with positive net income.Which one of the following will result if the firm pays a cash dividend?

• A)Number of shares outstanding will increase
• B)Earnings per share will decrease
• C)Total assets will remain constant
• D)Price-earnings ratio will decrease
• E)Total equity will increase

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Definitions:

Efficiency

The optimal allocation of resources to maximize the production of goods and services.

Equity

The value of an asset after deducting what is owed on it, or the ownership interest in a company as held by shareholders.

Tax Revenue

The income that is collected by the government through various forms of taxation, including income taxes, corporate taxes, and sales taxes, which is then used to fund public services and government operations.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded.