An Investor Is More Likely to Prefer a High Dividend

question 80

Multiple Choice

An investor is more likely to prefer a high dividend payout if a firm:

• A)has high flotation costs.
• B)has few, if any, positive net present value projects.
• C)has lower tax rates than the investor.
• D)has a stock price that is increasing rapidly.
• E)offers high capital gains which are taxed at a favorable rate.

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Definitions:

Book Value

Book value is the value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus depreciation.

Net Income

The net income of a business once all costs and taxes are deducted from the total earnings.

Operating Cash Flow

The cash generated from a company's normal business operations, indicating whether a company can generate sufficient positive cash flow to maintain and grow its operations.

Earnings Before Interest And Taxes

A financial metric indicating a company's profitability before expenses from interest and taxes are deducted.