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:

Qualitative Variable

A categorical variable that represents types or categories and can be described by names or labels.

High School

An educational institution that provides secondary education, typically for students aged 14 to 18 years old.

Regression Model

A statistical technique that models and analyzes the relationships between a dependent variable and one or more independent variables, used to predict the outcome of the dependent variable.

Number of Predictors

The total count of independent variables used in statistical models to predict an outcome.