Question

ignoring taxes and all else held constant, on the , the market value of a stock should decrease by the amount of the dividend.

Answer 1

The market value of a stock should drop by the dividend amount on the dividend declaration date, with taxes and other factors held constant.

Which of the following is a defense of the company's low dividend policy?

Until the gain is realized, the tax on capital gains is delayed. A low dividend tax will be preferred by the stockholders.

The constant dividend payment ratio has which of the following issues?

The issue with the constant dividend payout ratio is that the dividend's monetary value changes year over year. One possible justification for dividend payments is that they indirectly lead to a closer monitoring of management's investment activity, which reduces agency costs.

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