Consider the Timing of the Profits of the Following Certain

question 31

Multiple Choice

Consider the timing of the profits of the following certain investment projects: Profit
L S
Year 1 $ 0 $ 3000
Year 2 $ 3000 $ 0

• A)Project S is preferred to Project L.
• B)Project L is preferred to Project S.
• C)Projects S and L are equally desirable.
• D)A goal of profit maximisation would favor Project S only.

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Definitions:

Net Income

It represents the total earnings of a company after subtracting all expenses, taxes, and losses from the total revenue.

Cash Dividends

Payments made by a company out of its earnings to its shareholders, typically in the form of cash, representing a portion of the company's profits.

Retention Ratio

The percentage of net income that is retained in the business rather than paid out as dividends; synonymous with Plowback Ratio.

Cash Dividends

Cash dividends refer to the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.