Which of the Following Statements Is Correct

question 8

Multiple Choice

Which of the following statements is correct?

• A) The value of a company's share will decrease unless a dividend is paid every year
• B) The value of a company's share will increase if a regular dividend is paid
• C) If a company can earn a better rate of return, by investing retained profits, than shareholders can earn themselves, then dividends should be paid
• D) If a company can earn a better rate of return, by investing retained profits, than shareholders can earn themselves, then there is a case for dividends not to be paid

---

Definitions:

Price Index

A statistical measure that shows changes in the average price level of a selected basket of goods and services over time.

Real Gross Domestic Product

The total value of all goods and services produced within a country in a specific period, adjusted for inflation, indicating the actual growth of an economy.

Intrinsic Value

The actual, fundamental value of an asset, irrespective of its market value, determined through objective calculation or estimation.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.