Which of the Following Is Not a Reason for the Recent

question 23

Multiple Choice

Which of the following is not a reason for the recent decline in the use of stock options in executive pay?

• A) There has been growing pressure to expense stock options in annual reports.
• B) Stockholders dissatisfaction with treating stock options as a free good.
• C) Financial Accounting Standard number 313 raises the cost of using stock options.
• D) Stock options do not pay for executive performance.

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Definitions:

Required Return

The minimum percentage return that an investor expects to achieve by investing in a particular asset.

M&M II

Modigliani and Miller Proposition II, a theory on capital structure, posits that the value of a firm is not affected by its capital structure under a certain market process.

Bankruptcy Costs

Expenses associated with the process of declaring bankruptcy, including legal fees, filing fees, and other related costs.

Administrative Expenses

Costs related to the general operations of a business that are not directly tied to a specific project or product.