Which of the Following Is TRUE About the Implicit Assumption

question 71

Multiple Choice

Which of the following is TRUE about the implicit assumption of the DDM that "investors are rational"?

• A) I is correct, II is incorrect.
• B) I is incorrect, II is correct.
• C) I and II are correct.
• D) I and II are incorrect.
• I.It assumes that at each period of time,investors react rationally and value the shares based on what they rationally expect to receive next year.
• II.It rules out "speculative bubbles" or what is colloquially known as the "bigger fool theorem."

---

Definitions:

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities and resources required to produce them, aiming for more accurate cost allocation.

Direct Labor-Hours

The total hours of labor directly involved in manufacturing a product, which are often used to allocate manufacturing overhead costs to products.

Direct Materials Cost

The cost of raw materials and components that are directly used in the production of a product.

Activity-Based Costing

A method of accounting in which costs are assigned to products or services based on the resources they consume.