Which of the Following Is NOT an Advantage for a Company

question 77

Multiple Choice

Which of the following is NOT an advantage for a company that sells a company-issued option with a rights issue?

• A) It may add to the marketability of the associated rights issue.
• B) It reduces the necessity for the company to increase dividend payments immediately.
• C) If the holder of the option exercises the right to buy the shares offered then the company raises additional equity funds.
• D) There is no certainty that the future funds from the exercise of the option will eventuate.

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Definitions:

Expected Monetary Value

A mathematical method for determining the mean result when future events include both possible and impossible outcomes.

Profiling Machine

A machine used in manufacturing to shape or outline parts or materials according to a predetermined profile, commonly used in metalworking and woodworking.

Capacity Investment

The allocation of resources towards increasing the production or service capabilities of a business.

Favorable Market

A market condition that is advantageous for sellers, characterized by high demand and the ability to sell at higher prices.