The Manager of XYZ Corp

question 68

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:

Sherman Act

A foundational U.S. antitrust law enacted in 1890, aimed at prohibiting monopolistic practices and promoting competitive markets.

Monopoly Power

The exclusive control by one company over the entire supply of goods or services in a particular market.

Ancillary Vertical Restraints

Restrictions imposed in distribution agreements, designed to support the main purpose of the contract and enhance competitiveness.

Joint Undertaking

A collaborative effort or venture between two or more parties where each shares in the responsibilities, resources, and risks.