Which of the Following Statements Is CORRECT

question 6

Multiple Choice

Which of the following statements is CORRECT?

• A) 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 follow the strict residual dividend policy.
• B) If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
• C) 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.
• D) Despite its drawbacks, following the residual dividend policy 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.
• E) One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.

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Definitions:

CO₂

Carbon dioxide, a colorless gas produced by burning carbon and organic compounds and by respiration. It is absorbed by plants in photosynthesis.

Vasoconstriction

The narrowing of blood vessels, which increases blood pressure by reducing the volume or space inside the vessels.

Respiratory Centers

Brain regions that regulate the rate and depth of breathing, located primarily in the medulla oblongata and pons.

Central Nervous System

Consists of the brain and spinal cord, responsible for processing information and controlling the body's actions and reactions.