A Liquidating Dividend

question 109

Multiple Choice

A liquidating dividend:

• A)Occurs when a corporation distributes shares of its own stock as a dividend,rather than cash.
• B)Occurs whenever a corporation distributes non-cash assets as a dividend to its stockholders.
• C)Represents a distribution of a corporation's profits to the stockholders.
• D)Represents a return of invested capital to a corporation's owners,the stockholders.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, enabling comparison of the value of investments made at different times.

Net Present Value

A method used to evaluate investments by calculating the present value of expected future cash flows minus the initial investment cost.

Cash Inflows

Refers to the money received by a company during a particular period, including revenues from sales, investments, and financing activities.

Minimum Acceptable Rate

The lowest rate of return on an investment that a manager or investor is willing to accept.