Which of the Following Statements About Dividend Policies Is CORRECT

question 38

Multiple Choice

Which of the following statements about dividend policies is CORRECT?

• A) One reason that companies tend to avoid stock repurchases is that dividend payments are taxed at a lower rate than gains on stock repurchases.
• B) One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on the dividends that they choose to reinvest.
• C) One key advantage of a residual dividend policy is that it enables a company to follow a stable dividend policy.
• D) The clientele effect suggests that companies should follow a stable dividend policy.
• E) 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.

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Definitions:

Chest Pain

A sensation of discomfort or pain located in the area of the chest, which could be indicative of various medical conditions, ranging from non-serious to life-threatening.

Pain Level

An individual's subjective assessment of their pain intensity, usually measured on a scale.

Alert And Oriented

A medical assessment term indicating that a person is awake, responsive, and aware of their surroundings, time, and identity.

Heart Disease

A range of conditions that affect the heart, such as coronary artery disease, heart infections, and arrhythmias.