Suppose a Firm That Has Been Earning $2 and Paying

question 57

True/False

Suppose a firm that has been earning $2 and paying a dividend of $1.00, or a 50% payout, announces that it is increasing the dividend to $1.50. The stock price then jumps from $20 to $30. Some people would argue that this is proof that investors prefer dividends to retained earnings. Miller and Modigliani would agree with this argument.

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Definitions:

Higher-level Mental Processes

Complex cognitive functions such as problem-solving, reasoning, decision-making, and critical thinking that involve advanced brain operations.

Top-down Processing

A cognitive process whereby perceptions are built from sensory input by drawing on our experience and expectations.

Signal Detection

A theory that involves distinguishing between informative signals and background noise and the decision-making process in uncertain conditions.

Postoperative Pain

Pain experienced by patients after undergoing surgical procedures.