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Consider the Following Investment/dividend Opportunities Facing a Company

Question 23

Multiple Choice

Consider the following investment/dividend opportunities facing a company: Consider the following investment/dividend opportunities facing a company:   Assume that the interest rate in the capital market is 12 per cent per period.Also assume that the company has four equal shareholders (A,B,C and D) .Will the shareholders support the company's decision to invest in Projects Normal and Mega instead of just Project Mega? A) No,only Shareholder B will support such a decision. B) We cannot tell,as no information has been provided with regards to the consumption choices of Shareholders C and D C) Both Shareholders A and B will support this decision but we need to know the consumption choices of Shareholders C and D before being able to identify their preferences. D) All the shareholders will support the company's decision.
Assume that the interest rate in the capital market is 12 per cent per period.Also assume that the company has four equal shareholders (A,B,C and D) .Will the shareholders support the company's decision to invest in Projects Normal and Mega instead of just Project Mega?


A) No,only Shareholder B will support such a decision.
B) We cannot tell,as no information has been provided with regards to the consumption choices of Shareholders C and D
C) Both Shareholders A and B will support this decision but we need to know the consumption choices of Shareholders C and D before being able to identify their preferences.
D) All the shareholders will support the company's decision.

Correct Answer:

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