Which of the Following Statements Is CORRECT

question 29

Multiple Choice

Which of the following statements is CORRECT?

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

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Definitions:

Behavior Modification

The application of operant-conditioning techniques to teach new responses or to reduce or eliminate maladaptive or problematic behavior; also called applied behavior analysis.

Puzzle Boxes

Experimental devices used in animal learning research, where an animal must solve a problem or manipulate mechanisms to escape or obtain a reward.

Thorndike

An American psychologist who developed the law of effect, which states that behaviors followed by positive outcomes are likely to be repeated, while those followed by negative outcomes are not.

Skinner Box

An experimental apparatus developed by B.F. Skinner for studying behavioral conditioning in animals, particularly through the use of reinforcements.