Consider the Choice Between Paying Out Earnings to Shareholders Versus

question 10

Multiple Choice

Consider the choice between paying out earnings to shareholders versus retaining the earnings for investment.Which of the following assumptions must hold for dividend payout to either increase or decrease firm value,depending on whether there are positive NPV investment opportunities?

• A)It assumes that dividend payments are irrelevant under all circumstances.
• B)The firm will make profit every year and will pay dividends consistently.
• C)There are no tax considerations.
• D)Debt holders are indifferent to the choice between paying out earnings to shareholders versus retaining the earnings for investment.

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Definitions:

American Foreign Anti-Slavery Society

An organization established in 1839, focusing on combating slavery outside the United States, particularly in the Caribbean and South America.

Abolitionists

Abolitionists were individuals, in the 18th and 19th centuries, committed to the movement to end the slave trade and emancipate slaves, operating in both America and Europe, through advocating, campaigning, and influencing legislative change.

Constitution

The supreme law of the United States, establishing the framework for the federal government and outlining the rights of citizens.

Lane Theological Seminary

A historically significant religious institution in Cincinnati, Ohio, known for its debates on slavery and abolition in the 1830s, which had a profound impact on the anti-slavery movement.