For Which One of the Following Situations Will the Dividend

question 62

Multiple Choice

For which one of the following situations will the dividend valuation models be least reliable?

• A) mature firm with a policy of increasing its earnings and dividends at an average rate of 5% per year
• B) a young firm that does not pay dividends and is unlikely to begin doing so in the near future
• C) a preferred stock with a a constant dividend
• D) a company that is widely viewed as an attractive takeover target

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Definitions:

Two-Factor Theory

A concept in psychology that proposes emotional experiences arise from a combination of a state of physiological arousal and a cognitive interpretation of that arousal.

Physiological Reaction

A bodily response to a stimulus, such as an increase in heart rate, sweating, or the release of adrenaline, often not under conscious control and indicative of physiological processes.

Arousal Level

The physiological and psychological state of being awoken or stimulated to action.

Self-Discrepancy Theory

The theory that people feel anxiety when they fall short of how they ought to be but feel sad when they fall short of how they ideally want to be.