increase will increase the stock price because many investors value stock with a dividend-discount model. might MM disagree with this assertion?
increase will increase the stock price because many investors value stock with a dividend-discount model. might MM disagree with this assertion?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question

Transcribed Image Text:The manager of XYZ Corporation feels that a dividend
increase will increase the stock price because many
investors value stock with a dividend-discount model. Why
might MM disagree with this assertion?
Multiple Choice
O
O
O
O
The increased dividend makes the
firm much riskier.
If investment policy remains
unchanged, the company must
replace the cash with a stock
issue.
Investors prefer capital gains over
dividends.
Dividend increases will increase
the book value but not the market
value of the firm.
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