Which of the Following Is True About the Dividend Relevance

question 29

Multiple Choice

Which of the following is true about the dividend relevance theory?

• A) If investors prefer capital gain on their investment, then the tax effect of dividend receipts does not have any effect on the price of stocks.
• B) If investors prefer current income on their investment, then the tax effect of dividend receipts does not have any effect on the price of stocks.
• C) If investors prefer current income on their investment, the required return on equity should decrease as the dividend payout is increased.
• D) If investors prefer capital gain on their investment, free cash flows to equity should decrease.
• E) If investors prefer both capital gain and current income, the net income of the firm should decrease.

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Definitions:

No Known Effect

A phrase indicating that no observable or measurable impact has been identified.

Vitamin K

A group of structurally similar, fat-soluble vitamins that are essential for blood clotting and bone metabolism.

Folate

A B-vitamin, also known as Vitamin B9, vital for DNA synthesis and repair, red blood cell formation, and preventing anemia.

Immune Function

The activities and mechanisms through which an organism's immune system identifies and eliminates pathogens and unhealthy cells.