Which of the Following Statements Is CORRECT

question 42

Multiple Choice

Which of the following statements is CORRECT?

• A)One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
• B)If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should not follow the strict residual dividend policy.
• C)If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
• D)If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase their dividend payout ratios.
• E)Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.

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Definitions:

Rehearsal

The practice or process of practicing an action or performance in preparation for a public presentation.

Continuous Reinforcement

A learning process in which a behavior is rewarded every time it occurs, leading to faster acquisition of the behavior.

Delayed Reinforcement

A strategy in which the reward or consequence for a behavior is presented after a significant time lapse, affecting the conditioning process.

Reinforcement

In psychology and organizational behavior, the process of encouraging or establishing a pattern of behavior by offering rewards or consequences.