Grainery Distillers,Inc

question 68

Multiple Choice

Grainery Distillers,Inc.is experiencing high demand for its products and high growth rates.The company just reported earnings per share of $5 for the most recent year and has many positive NPV projects to fund.One vice president wants to pay a dividend of $5 per share,arguing that this will maximize shareholder value.You argue that a much smaller dividend will maximize value.Your argument may be based on

• A) the bird-in-the-hand theory.
• B) the residual dividend theory.
• C) the information effect.
• D) the very high agency costs of the corporation.

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Definitions:

Over-The-Counter

A decentralized market where securities not listed on formal exchanges are traded directly between parties.

Voucher System

An internal control mechanism in accounting, where documents (vouchers) are prepared for every transaction involving the payment of cash or transfer of funds.

Documentation

Written or electronic records that provide evidence of transactions, processes, or agreements.

Verification

The process of ensuring the accuracy and validity of data or documents.