The Marginal Principle of Retained Earnings Means That Each Potential

question 43

Multiple Choice

The marginal principle of retained earnings means that each potential project to be financed by retained earnings must

• A)provide a higher rate of return than the stockholders can achieve after paying taxes on the distributed dividends.
• B)yield a return equal to or greater than the marginal cost of capital.
• C)provide enough return to pay the corporation's marginal tax rate.
• D)have an internal rate of return greater than the corporate growth rate of dividends.

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