Author Question: The bird-in-the-hand dividend theory suggests that A) high dividends increase stock value because ... (Read 115 times)

nenivikky · **on:** Jul 10, 2018

The bird-in-the-hand dividend theory suggests that

A) high dividends increase stock value because shareholders are more certain of the dividend
yield than of potential future capital gains.
B) high dividends decrease stock value because dividend payments take money out of the
corporate nest and reduce the ability of the corporation to function effectively.
C) high dividends increase stock value because capital markets are inefficient and dividends are
the only sure way to get money from an equity investment.
D) high dividends increase stock value because shareholders believe they can earn a higher
return than the company.

Question 2

Ribbon Industries reported sales of 3 million and net income of 400,000 for 2010. The retained
earnings balance at the end of 2012 is 7 million. Ribbon Industries has a dividend payout ratio of
30.

If sales are expected to increase by 25 next year, what will be the projected balance in
retained earnings using the percent of sales method?
A) 7,350,000 B) 6,720,000 C) 7,280,000 D) 8,750,000