Which of the Following Statement Completions Is Correct? If Investors

question 27

Multiple Choice

Which of the following statement completions is correct? If investors prefer dividends to capital gains, then

• A)The equilibrium return, rs, will not be affected by a change in dividend policy because tax effects will offset these preferences.
• B)rs will decrease as dividends are reduced.
• C)rs will increase as dividends are reduced.
• D)rs will decrease as the retention rate increases.
• E)Dividend policy as determined by the residual dividend model is the only dividend policy which will maximize the price per share of common stock.

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Definitions:

Trustworthiness

The quality or state of being reliable, dependable, and worthy of trust, often regarded as a fundamental trait in personal and professional relationships.

Confidentiality

The requirement to keep certain information private and not disclose it without proper authorization.

Consultation

The process of seeking advice or expertise from someone with specialized knowledge, typically within a professional context.