Which of the Following Statement Completions Is Correct? If Investors

question 70

Multiple Choice

Which of the following statement completions is correct? If investors prefer dividends to capital gains,then

• A) The equilibrium return,r_s,will not be affected by a change in dividend policy because tax effects will offset these preferences.
• B) r_s will decrease as dividends are reduced.
• C) r_s will increase as dividends are reduced.
• D) r_s will decrease as the retention rate increases.
• E) Dividend policy as determined by the residual dividend model is the only dividend policy which will maximize the price per share of common stock.

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Definitions:

Extraversion

A personality trait characterized by sociability, talkativeness, assertiveness, and high amounts of emotional expressiveness.

Openness

One of the five major dimensions of personality, characterized by an appreciation for art, emotion, adventure, and unusual ideas; imaginative and curious individuals.

Agreeableness

A personality trait characterized by compassion, cooperativeness, and a desire to maintain positive social relations.

Conscientiousness

A personality trait characterized by diligence, carefulness, and a strong sense of duty.