Which of the Following Would Result from Payment of the Stock

question 43

Multiple Choice

Which of the following would result from payment of the stock dividend?

• A) Total equity would remain at $50,000,000.
• B) Total equity would increase to $57,500,000.
• C) Total equity would decrease to $43,478,261.
• D) The effect on the equity account would depend on the market's reaction to the dividend.

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Definitions:

Annual Cash Flows

The total amount of money that is transferred into and out of a business, project, or investment within a year.

Required Rate

The minimum return that investors expect to earn when they invest in a project, often used as the discount rate in capital budgeting.

Straight-line Depreciation

A method for dispersing the cost of a physical asset across its useful life in even annual allocations.

Discounted Payback

A capital budgeting method used to determine the profitability of an investment by calculating the time it takes for the present value of cash flows to cover the initial investment cost.