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:

Interval Estimate

An estimate of a population parameter that is given as a range of values, offering a level of confidence in the estimate's accuracy.

Hypotheses Testing

A method of statistical inference that is used to decide whether the data at hand sufficiently support a particular hypothesis.

Senatorial Election

A political process through which individuals are elected to represent a state or equivalent entity in the senate.

Expected Value

The average of all possible outcomes of a random variable, weighted by their respective probabilities.