What Effect Do Stock Dividends Have on Firm Value

question 51

Multiple Choice

What effect do stock dividends have on firm value?

• A)They increase total firm value because more shares are outstanding.
• B)They decrease total firm value because EPS is lowered.
• C)They increase total firm value because each shareholder has a larger share of the firm.
• D)They have no effect on firm value.

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Definitions:

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are accessible to all without diminishing availability to others, such as public parks or national defense.

Ability-To-Pay Philosophy

A principle that asserts taxes should be levied based on an individual's or entity's capacity to pay, implying those with higher income or wealth should pay more in taxes.

Progressive Income Tax

A tax system in which the tax rate increases as the taxable income increases, imposing higher rates on those with higher incomes.

Taxation

The process by which a government levy charges on citizens or corporate entities to finance government spending and activities.