Everything Else Equal, If Stockholders Prefer Current Income to Future

question 29

Multiple Choice

Everything else equal, if stockholders prefer current income to future income (i.e., capital gains) , a firm's cost of equity will:

• A)decrease if its dividend payout increases.
• B)decrease if its eliminates all dividend payments.
• C)decrease if its excess (free) cash increases.
• D)decrease if management promotes its wishes to restrict ownership in the firm.
• E)increase if debt restrictions decrease.

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Definitions:

Behavioral Model

An approach in psychology that emphasizes the study of observable and measurable behaviors, rather than internal mental processes, and postulates that all behavior is learned.

Adherence

The degree to which a person’s behavior corresponds with agreed recommendations from a healthcare provider.

Noncompliant Personality

A behavioral disposition characterized by resistance or refusal to follow rules or instructions.

Smoking Cessation

The process of discontinuing tobacco smoking, which can reduce the risks of developing many health issues, including cardiovascular disease and cancer.