Which of the following statements regarding dividends and dividend policy is LEAST true? A. With ...
Which of the following statements regarding dividends and dividend policy is LEAST true?
A. With no taxes, the idea of homemade dividends implies that dividend policy doesn't matter.
B. A stock repurchase may be a preferable alternative to dividends, for investors in higher tax brackets.
C. The clientele effect suggests that investors prefer higher dividend paying stocks.
D. The signalling effects of dividends imply that a firm may be able to increase firm value by increasing dividends
Homework Answers
Option C The clientele effect suggests that investors prefer higher dividend paying stocks
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Which of the following statements regarding dividends and dividend policy is LEAST true? A. With ...
5. (Dividends and share repurchases: Analysis) The clientele effect implies that: (a) investors prefer high dividend...
5. (Dividends and share repurchases: Analysis) The clientele effect implies that: (a) investors prefer high dividend paying shares (b) investors have varying preferences regarding dividends (c) low tax bracket investors are indifferent to dividends
3. Which of the following statements are true regarding Modigliani and Miller’s approach to dividend policy?...
3. Which of the following statements are true regarding Modigliani and Miller’s approach to dividend policy? I. In a world without taxes and transactions costs and perfect capital markets, the dividend policy of a firm is irrelevant. II. In a world with taxes, transactions costs and perfect capital markets, the dividend policy of a firm is irrelevant. III. With brokerage fees, dividend policy will increase the value of the firm paying dividends. A) I only B) II only C) I...
Question 3 Explain the concept of dividend policy with an example. Discuss the dividend irrelevance theory...
Question 3 Explain the concept of dividend policy with an example. Discuss the dividend irrelevance theory with underlying assumptions by Modigliani and Miller. Your parents prefer high dividend paying stocks, while you prefer no-dividend stocks – explain the possible reasons for the differences in choice. Explain the following concepts with an example; Signaling hypothesis Clientele effects Catering theory You are the CEO of “I am the top 1%” Corporation, which has a capital structure of 60% equity and 40% debt....
Which of the following statements is true? Taxes on dividend income are paid when the stock...
Which of the following statements is true? Taxes on dividend income are paid when the stock is sold. Taxes on dividend income are paid in the year that they are received As a result, the U.S. tax code encourages many individual investors to prefer to receive Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. The theory of explains this phenomenon In some cases, analysts notice that...
Which of the following statements is correct? a. If a firm follows the residual dividend policy,...
Which of the following statements is correct? a. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm’s dividend payout during that year. b. The clientele effect can explain why many firms change their dividend policies so often. c. One advantage of adopting the residual dividend policy is that this policy makes it easier for corporations to develop a specific and well-identified dividend clientele. d. Stock...
Which of the following statements is correct? a. The tax code encourages companies to pay dividends...
Which of the following statements is correct? a. The tax code encourages companies to pay dividends rather than reinvest earnings. b. Companies may pay too high a price in a large open market repurchase if it takes too long to complete. c. An investor's capital gains from selling stock in a repurchase are always taxed at a higher rate than if the distribution were dividends. d. The stronger management thinks the clientele effect is, the more likely the firm is...
Which of the following statements are true regarding dividends?
Which of the following statements are true regarding dividends? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) A stock dividend increases the number of outstanding shares. A large stock dividend is a distribution of more than 25% of previously outstanding shares. A company with a retained earnings deficit is never...
1. Dividend policy A firm’s value depends on its expected free cash flow and its cost...
1. Dividend policy A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm’s value and the investors in different ways. Some analysts have argued that a firm’s value should solely be determined by its basic earning power and the business risk of the firm. Which of these concepts would support these analysts’ argument? A. The signaling hypothesis B. Dividend irrelevance theory C....
12. Dividend policy A firm’s value depends on its expected free cash flow and its cost...
12. Dividend policy A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm’s value and the investors in different ways. Some analysts have argued that a firm’s value should solely be determined by its basic earning power and the business risk of the firm. Which of these concepts would support these analysts’ argument? The signaling hypothesis The clientele effect Dividend irrelevance theory...
Which of the following statements is correct? a. One advantage of the residual dividend policy is...
Which of the following statements is correct? a. One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like. b. An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM. c. If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price. d....
5. (Dividends and share repurchases: Analysis) The clientele effect implies that: (a) investors prefer high dividend paying shares (b) investors have varying preferences regarding dividends (c) low tax bracket investors are indifferent to dividends
Which of the following statements is true? Taxes on dividend income are paid when the stock is sold. Taxes on dividend income are paid in the year that they are received As a result, the U.S. tax code encourages many individual investors to prefer to receive Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. The theory of explains this phenomenon In some cases, analysts notice that...
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