Which of the Following Statements About Dividend Policies Is CORRECT

question 32

Multiple Choice

Which of the following statements about dividend policies is CORRECT?

• A)Modigliani and Miller argue 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 avoid stock repurchases is that dividend payments are taxed at a lower rate than gains on stock repurchases.
• C)One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.
• D)One key advantage of a residual dividend policy 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:

Charles Darwin

A British naturalist best known for his contributions to the science of evolution and the theory of natural selection.

Evolution

The method through which various types of living beings are believed to have evolved and varied from ancient predecessors throughout Earth's history.

Behavior Genetics

A discipline focused on analyzing how genetics and environmental factors impact behaviors.

Genetic Influences

Factors determined by genes inherited from parents that affect various aspects of an individual’s physical traits, behaviors, and susceptibility to certain diseases.