Which One of These Is a Con of Paying Dividends

question 39

Multiple Choice

Which one of these is a con of paying dividends?

• A)Paying dividends reduces agency costs when excess cash is available to a firm.
• B)Dividends can be used to signal a firm's optimistic outlook.
• C)Dividends are frequently taxed as ordinary income.
• D)Dividends appeal to income-seeking investors.
• E)Managers can pay dividends to keep cash from bondholders.

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Definitions:

Barriers to Entry

Economic, procedural, or market-based factors that obstruct or restrict the ability of new competitors to enter an industry.

Oligopolistic

Pertaining to a market structure characterized by a small number of firms dominating the market, leading to limited competition.

HHI

Herfindahl-Hirschman Index, a measure of market concentration to assess the level of competition among firms.

Herfindahl-Hirschman Index

An economic indicator used to evaluate the level of competition within an industry by measuring the concentration of market share held by the largest firms.