Which of the Following Statements Is Correct

question 48

Multiple Choice

Which of the following statements is correct?

• A) if a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should not follow the strict residual dividend policy.
• B) if a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
• C) if congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase their dividend payout ratios.
• D) despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.
• E) one advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.

---

Definitions:

Objectively

In a manner that is not influenced by personal feelings or opinions, focusing only on facts.

Independent Variable

In experimental and statistical research, the variable that is manipulated or changed by the researcher to observe its effects on the dependent variable.

Dependent Variable

In research, the variable being tested and measured, expected to change as a result of manipulations to the independent variable.

Independent Variable

The variable in an experiment that is manipulated or changed by the researcher to observe its effect on the dependent variable.