Suppose That There Are No Taxes, Transactions Costs, or Other

question 60

Multiple Choice

Suppose that there are no taxes, transactions costs, or other market imperfections. Which of the following actions is most likely to make shareholders better off?

• A)Increase dividends.
• B)Reduce share repurchases.
• C)Announce that dividends will not change for at least three years.
• D)Eliminate negative-NPV projects.

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Definitions:

Closing Costs

These are fees and expenses, aside from the price of the property, paid by buyers and sellers when transferring ownership of a property.

Freight-In

The cost of transporting goods into a warehouse or to the buyer, which is typically included in the cost of goods sold.

Component Depreciation

A method of depreciation where different components of a fixed asset, with different useful lives, are depreciated separately.

Land Improvements

Enhancements made to a parcel of land to increase its value or usability, such as landscaping, paving, or installation of utilities, which are typically considered depreciable assets.