Shareholders May Prefer Dividends to Reinvestment by the Firm

question 55

Multiple Choice

Shareholders may prefer dividends to reinvestment by the firm:

• A) because dividends payments are certainty every year.
• B) because dividend payments have an information content.
• C) because investors may prefer future cash to current cash.
• D) because the firm can earn higher returns than the shareholder.

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Definitions:

Proactive Interference

A phenomenon where old information hinders the recall or learning of new information.

Source Amnesia

The loss of memory regarding the specific context, including the place, time, or manner in which certain knowledge was gained, despite retaining the facts themselves.

Imagination Inflation

The increase in confidence that an imagined event actually occurred, due to the imagining of the event.

Misinformation Effect

A phenomenon where one's recall of episodic memories becomes less accurate due to post-event information.