Question

Which of the following is a benefit of a company paying a smaller dividend? Select One:...

Which of the following is a benefit of a company paying a smaller dividend?

Select One:
a. A low dividend yield may indicate that the firm is experiencing rapid growth.
b. More money is being reinvested by the company in new products, increasing its overall value
c. It could lead to lower taxes in the long-run for the shareholder.
d. All of these answers.
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Answer #1

A lower dividend yield may indicate that the firm is experiencing rapid growth which in turn will benefit the growth in company value. Growth in company value leads to an increase in shareholders wealth.

More money is being reinvested by the company in new products, increasing in overall value. I will help the company to grow on a large scale and in turn shareholders, wealth will increases.

It could lead to lower taxes in the long run for the shareholder.

Option (b) will benefit the company to grow by reinvesting the earnings.

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