The Manager of XYZ Corp

question 11

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 lower 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:

Raw Materials Inventory

The total cost of all components and materials stored that are intended to be used in production.

Accounts Payable

Accounts payable represents the company's obligation to pay off a short-term debt to its creditors or suppliers.

Conversion

The process of changing an asset or security into another form, such as converting preferred stock into common stock or converting currencies.

Weighted-Average Method

An inventory costing approach that calculates the cost of goods sold and ending inventory based on the average cost of all items.