The Manager of XYZ Corp

question 15

Multiple Choice

The manager of XYZ Corp.feels that a dividend increase will increase the 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) If investment policy is to remain unchanged, the company will need to replace the cash with a stock issue.
• 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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