Which of the Following Statements Is CORRECT

question 29

Multiple Choice

Which of the following statements is CORRECT?

• A) One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
• B) 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 adhere strictly to the residual dividend model.
• C) If a firm adheres strictly to the residual dividend model,then,holding all else constant,its dividend payout ratio will tend to rise whenever its investment opportunities improve.
• D) 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.
• E) Despite its drawbacks,following the residual dividend model 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.

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Definitions:

Social Scientific Evidence

Information and insights derived from systematic study of society and the behaviors of individuals within society, using methodologies of the social sciences.

Immigrants

Individuals who move from their country of origin to live in a foreign country, often seeking better living conditions, employment, or educational opportunities.

Lifetime Likelihood

The probability or chance of encountering or experiencing a particular event or series of events over the course of a lifetime.

Imprisonment

The state of being confined in prison as a punishment for crimes committed.