Which of the Following Statements About Dividend Policies Is CORRECT

question 6

Multiple Choice

Which of the following statements about dividend policies is CORRECT?

• A) Miller and Modigliani argued that investors prefer dividends to capital gains because dividends are more certain than capital gains. They call this the "bird-in-the-hand" effect.
• B) One reason that companies tend to favor distributing excess cash as dividends rather than by repurchasing stock is that dividends are normally taxed at a lower rate than gains on repurchased stock.
• C) One advantage of dividend reinvestment plans is that they allow shareholders to delay paying taxes on the dividends that they choose to reinvest.
• D) One key advantage of the residual dividend model is that it enables a company to follow a stable dividend policy.
• E) The clientele effect suggests that companies should follow a stable dividend policy.

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Definitions:

Overt Guidance

A form of direct instruction or intervention where actions and directives are openly given to guide behavior.

Problematic Schemas

Enduring and deeply held beliefs or patterns of thought that are dysfunctional or maladaptive, often contributing to psychological distress.

Traumatic Experiences

Events or situations that are overwhelmingly distressing to an individual, potentially leading to lasting psychological impact.

Resistant to Challenge

Displaying opposition or reluctance to confront or address difficulties, often in the context of therapy or personal growth.