The Issuance of Stock to Fund a Project Tends To

question 37

Multiple Choice

The issuance of stock to fund a project tends to:

• A)have no effect on the previous shareholders.
• B)create costless benefits for the firm.
• C)cause any potential gains to the firm from the project to be lost.
• D)affect future dividends but not the appreciation realized by previous shareholders.
• E)dilute the capital gains that would have been earned by the previous shareholders.

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Definitions:

Consumption

Consumption encompasses the acquisition and use of goods and services by households to satisfy their needs and wants.

Induced Consumption

Consumer spending that is influenced by changes in income, differentiating from autonomous consumption which does not vary with income.

Disposable Income

The liquidity households have for spending and saving, after income taxes have been deducted.

Consumption

The act of using goods and services by households that leads to a decrease in their availability.