Everything Else Equal, If a Firm Increases the Dividend That

question 33

Multiple Choice

Everything else equal, if a firm increases the dividend that it pays from $4 to $5:

• A)more money will be available to invest in capital budgeting projects.
• B)its future growth rate will decrease.
• C)demand for the stock will decrease among investors who prefer to receive current income from their investments.
• D)the firm should expect many of the investors who held the stock prior to the increase to sell their stock
• E)its operating income will increase.

Demonstrate knowledge of the effects of changes in the discount rate on the present value of cash flows.

Identify the factors influencing the selection of discount rates in investment decisions.

Evaluate investments based on present and future values to make informed decisions.

Apply the concept of the time value of money to assess lease agreements and investment opportunities.

---

Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period, typically measured by the rise in real GDP.

Productivity

The efficiency with which goods and services are produced, typically measured in terms of output per labor hour.

Living Standards

Refers to the level of wealth, comfort, material goods available to a person, group, or nation, similar to the standard of living.

Human Capital

The collective skills, knowledge, and other intangible assets of individuals that can be used to create economic value.