An Attraction of Internal Equity Is That _____________________ but a Disadvantage

question 23

Multiple Choice

An attraction of internal equity is that _____________________ but a disadvantage is that _____________________________.

• A)earnings are increased;dividends to stockholders are reduced
• B)the cost of internal equity is very low;earnings are reduced
• C)the cost of internal equity is very low;regulatory approval is necessary for the use of internal equity
• D)the cost of internal equity is very low;dividends to stockholders are reduced

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Definitions:

Net Present Values

Net Present Values is the plural form of Net Present Value, referring to the calculation that determines the sum of the present values of all future cash flows associated with an investment, less the initial investment cost.

Market-to-Book Value

A ratio used to compare a company's market value to its book value, indicating the market's perception of the value of its equity.

Cash Offer

A proposal to buy assets, including securities or real estate, using cash as the form of payment without involving financing or loans.

Rights Offer

An offer to existing shareholders to buy additional shares in a company at a discount to the market price.