Suppose that a company has X units of resources and is considering three investment/dividend policies,P₁,P₂ and P.The following graph shows market opportunity lines drawn through each of these points:
The line through P₁ shows that:

Question

Suppose that a company has X units of resources and is considering three investment/dividend policies,P₁,P₂ and P.The following graph shows market opportunity lines drawn through each of these points:

Suppose that a company has X units of resources and is considering three investment/dividend policies,P<sub>1</sub>,P<sub>2</sub> and P.The following graph shows market opportunity lines drawn through each of these points: The line through P<sub>1</sub> shows that: A) if policy P<sub>1</sub> were adopted,the shareholders' wealth would decrease from W to W<sub>1</sub>. B) if policy P<sub>1</sub> were adopted,the shareholders' wealth would increase from X to W<sub>1</sub>. C) if policy P<sub>1</sub> were adopted,the shareholders' wealth would remain unchanged at W<sub>1</sub>. D) none of the given options.

The line through P₁ shows that:

Quizplus · Accepted Answer

The market opportunity line through P₁ has a steeper slope than the line through X, indicating that adopting policy P₁ would increase the shareholders' wealth from X to the point of intersection with the market opportunity line, which is W₁. Therefore, the best choice is to adopt policy P₁.

Suppose That a Company Has X Units of Resources and Is