Which of the Following Statements Is TRUE

question 7

Multiple Choice

Which of the following statements is TRUE?

• A) There has traditionally been a tax advantage to paying dividends over capital gains.
• B) Investors like to be paid in dividends despite the tax inefficiency because of the agency problem.
• C) High-dividend taxes typically push firms to choose equity financing instead of debt financing.
• D) There is no reason for corporations or investors to have a preference between paying dividends or reinvesting profits.

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Definitions:

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without prior conditioning or learning.

Conditioned Response

A conditioned response is a learned reaction to a previously neutral stimulus that has become associated with an unconditioned stimulus through conditioning.

Unconditioned Stimulus

In classical conditioning, it is a stimulus that naturally and automatically triggers a response without prior learning.

Conditioned Stimulus

A previously neutral stimulus that, after being paired with an unconditioned stimulus, elicits a conditioned response.