Which of the Following Statements Is Most Correct

question 40

Multiple Choice

Which of the following statements is most correct?

• A) The tax preference theory states that, all else equal, investors prefer stocks that pay low dividends because retained earnings can lead to capital gains that are taxed preferentially.
• B) An increase in the cost of equity capital (rs) when a company announces an increase in its dividend per share would be consistent with the bird-in-the-hand theory.
• C) An increase in the stock price when a company decreases its dividend is consistent with the signaling theory.
• D) A dividend policy that involves paying a consistent percentage of net income is the best policy if the "clientele effect" is correct.
• E) Both statements a and d are correct.

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Definitions:

Living Wage

A wage sufficient for a worker and their family to live on, covering basic needs such as housing, food, and healthcare, aimed at promoting fair labor practices.

American Standard

Often refers to a set of guidelines or specifications used in the United States for various products, practices, or measurements to ensure quality, safety, and efficiency.

New Immigrants

Wave of newcomers from southern and eastern Europe, including many Jews, who became a majority among immigrants to America after 1890.

Close-Knit Communities

Social groups characterized by strong bonds, frequent interactions, and a high degree of solidarity among members.