Question

If investors prefer firms that retain most of their earnings,then a firm that wants to maximize...

If investors prefer firms that retain most of their earnings,then a firm that wants to maximize its stock price should set a low payout ratio.
True or False?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

TRUE

DIVIDEND PAYOUT RATIO:

Dividend payout ratio measures the percentage of earning paid annually to shareholders as dividend.

Dividend payout ratio= Annual dividend per share /

Earning per share

WHY SHOULD DIVIDEND PAYOUT RATIO IS LOW?

Many type of companies tend to attract growth investor who are more interested in profit maximization from rise in share price and less interested in dividend income so, that's why many of companies have low dividend payout ratio.

​​

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm with uncertain earnings that has adopted a constant dividend payout policy will most likely...
A firm with uncertain earnings that has adopted a constant dividend payout policy will most likely have a stable dividend payout ratio, but unstable dollar dividends, over time. True or false
3. Which of the following statements about dividend is NOT true? Bird-in-the-hand theory says that investors...
3. Which of the following statements about dividend is NOT true? Bird-in-the-hand theory says that investors think dividends are less risky than potential future capital gains, so they like dividends. Tax preference theory indicates that low dividend payments mean higher capital gains. Capital gains taxes are lower than dividend taxes, and they can be deferred. So investors prefer low-dividend-payments or non-dividend-payments firms.            Based on the Bird-in-the-hand theory, a firm should set high dividend payout ratio to increase firm value Based...
Typically firms with low Price/Earnings ratio have high MV/BV ratios. True or False?
Typically firms with low Price/Earnings ratio have high MV/BV ratios. True or False?
Which of the following statements is FALSE? A. The most common valuation multiple is the price-earnings...
Which of the following statements is FALSE? A. The most common valuation multiple is the price-earnings (P/E) ratio. B. You should be willing to pay proportionally more for a stock with lower current earnings. C. A firm's P/E ratio is equal to the share price divided by its earnings per share. D. The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm's future earnings...
Consider two zero-growth mature firms where all earnings are paid out as dividends, and investors in...
Consider two zero-growth mature firms where all earnings are paid out as dividends, and investors in both firms require a return of 12%. Both firms ABC and XYZ just earned $10 million dollars over the last year. Firm ABC has 10 million shares outstanding, but XYZ has 20 million shares outstanding. The current stock price per share of ABC = $______ , A-$16.66 B-$8.33 C-$4.17 D-$2.00 and the current stock price per share of XYZ = $______. A-$16.66 B-$8.33 C-$4.17...
Firm M's earnings and stock price tend to move up and down with other firms in...
Firm M's earnings and stock price tend to move up and down with other firms in the S&P 500, while Firm W's earnings and stock price move counter cyclically with M and other S&P companies. Both M and W estimate their costs of equity using the CAPM, they have identical market values, their standard deviations of returns are identical, and they both finance only with common equity. Which of the following statements is CORRECT? a. Since M and W move...
A company plans to retain and reinvest all of their earnings for the next 25 years....
A company plans to retain and reinvest all of their earnings for the next 25 years. Investors believe that, beginning in year 26, the firm will begin to pay a dividend of $7.00 per share. The dividend will increase at a 5% rate annually forever. Given a required rate of return of 10%, the stock should sell today for _______ Group of answer choices $11.75 $12.42 $12.92 $10.64
Companies will set low payout ratios and finance by retaining earnings rather than through the sale...
Companies will set low payout ratios and finance by retaining earnings rather than through the sale of new common stock when: Select one: a. flotation costs are high. b. management wants to dilute the ownership. c. firm has no constraints in distributing dividends. d. firm has excess cash to distribute. e. firm has less investment opportunities to use its earnings.
Refer to the figure. If the firm wants to maximize revenue, it will set price: •...
Refer to the figure. If the firm wants to maximize revenue, it will set price: • Somewhere in the elastic range of the demand curve (e > 1). • Somewhere in the inelastic range of the demand curve (e < 1). • Where price elasticity of demand equals one (e = 1). • Where price is maximum. THE DIAGRAM IS THE UNITERATY ,ELASTIC, NO ELASTIC. DIAGRAM.
f a firm follows a stable dividend policy while its earnings are growing and no new...
f a firm follows a stable dividend policy while its earnings are growing and no new stock has been issued, what would happen to the firm’s dividend payout ratio over time? a. The payout ratio will decrease. b. The payout ratio will increase. c. The payout ratio will decrease initially and then increase. d. The payout ratio will remain stable and not change.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT