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problem1: Low dividends may increase stock value according to the _____.

[A] Bird-in-the-hand theory

[B] Information effect

[C] Impact of agency costs

[D] Tax bias in favor of capital gain

problem2: The “bird-in-the-hand” dividend theory suggests that _____.

[A] High dividends increase stock value because capital markets are inefficient and dividends are the only sure way to get money from an equity investment

[B] High dividends decrease stock value because dividend pay take money out of the corporate “nest” and reduce the ability of the corporation to function efficiently

[C] High dividends increase stock value because shareholders believe they can earn a higher return than the company

[D] High dividends increase stock value because shareholders are more certain of the dividend yield than of potential future capital earns

problem3: The residual dividend theory suggests that dividends will only be paid ____.

[A] If interest rates available to shareholders are higher than the required return on the company’s stock

[B] If current retained earnings exceed the equity portion of the company’s capital budget

[C] If the tax rate on capital gains is higher than the tax value on dividends

[D] If the corporation has more positive NPV projects than it can fund

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919453

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