The Manager of XYZ Corp

question 76

Multiple Choice

The manager of XYZ Corp.feels that a dividend increase will increase stock price because many investors value stock with a dividend-discount model.Why might MM disagree with this assertion?

• A)the increased dividend makes the firm much riskier.
• B)future dividend growth may slow due to less retained earnings.
• C)investors prefer capital gains over dividends.
• D)dividend increases will increase the book value but not the market value of the firm.

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Definitions:

Effect Uncertainty

involves the unpredictability surrounding the consequences or outcomes of a decision or action.

State Uncertainty

The condition of not knowing the true state of a system or environment, often due to insufficient information.

Economic Uncertainty

The unpredictability in economic conditions, which can include factors such as inflation rates, employment levels, and market volatility, affecting business and investment decisions.

Macro Uncertainty

The uncertainty that exists within the broad economy which can impact decision-making and future outcomes on a large scale.