A Stock Is Purchased Either for the Expected Gain in the Price

question 75

True/False

A stock is purchased either for the expected gain in the price of the stock,for the dividends that the stock may pay,or both.

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Definitions:

Risk-adjusted

This term describes the process of taking financial risks into account when evaluating the potential returns of an investment, leading to a more accurate understanding of its true value.

Discount Rates

The interest rate used to calculate the present value of future cash flows.

Risk

The possibility of losing some or all of an investment, reflecting uncertainty about the actual future returns.

Sunk Cost

A cost that has already occurred and that is not affected by the capital project decision. Sunk costs are not relevant to capital budgeting decisions.