Which of the Following Statements Is Most Correct

question 37

Multiple Choice

Which of the following statements is most correct?

• A) The tax code encourages companies to pay large dividends to their shareholders.
• B) If your company has established a clientele of investors who prefer large dividends, the company is unlikely to adopt a residual dividend policy.
• C) If a firm follows a residual distribution policy (with all distributions in the form of dividends), holding all else constant, its dividend payout will tend to rise whenever the firm's investment opportunities improve.
• D) All of the statements above are correct.
• E) Answers b and c are correct.

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Definitions:

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