Which of the Following Statements Is CORRECT

question 29

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 adhere strictly to the residual dividend model.
• C) If a firm adheres strictly to the residual dividend model,then,holding all else constant,its dividend payout ratio will tend to rise whenever its 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 model 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:

Ethical Life

A life lived in accordance with principles of morality and ethics.

Philosophers

Thinkers who seek to understand fundamental truths about the world, humanity, and the relationship between them, using reasoned arguments.

Natural Qualities

Natural qualities refer to the inherent characteristics or attributes that something or someone possesses by virtue of its nature or essence, often observed in contrast to qualities acquired through experience.

Virtues

Moral excellence and righteousness; qualities that are considered morally good or desirable in a person.