alleryStart learning →With no NPV-positive projects and surplus cash, what should management do?
APay cash to owners
BHoard the cash
CRaise new debt
DIssue more shares
Answer & Solution
Correct answer: A. Pay cash to owners
With no projects earning above the hurdle rate, surplus cash is best returned to shareholders.
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Related questions
Which limits can restrict how much a firm may distribute as dividend?Why might management avoid changing dividend policy abruptly?Which alternative to cash dividends may a firm choose when surplus cash exists?Which type of shareholder usually prefers earnings to be retained?Management knowing more than the market is called what?If dividends bear higher tax than gains, raising them does what to value?Per the Modigliani-Miller theorem, dividend policy has what effect on firm value?Which sections of the UK Companies Act 2006 govern the payment of dividends?