One rationale for using expected dividends in valuation is:
A) Dividends are a necessary payment in order for a firm to have value.
B) Dividends are paid in cash, and cash serves as a measurable common denominator for comparing the future benefits of alternative investment opportunities.
C) Dividends are the most reliable measure of value because most companies payout dividends to shareholders.
D) Dividend payout ratios are set based on profitability.

Question

Quizplus · Accepted Answer

Expected dividends are used in valuation because they are paid in cash, which serves as a measurable common denominator for comparing the future benefits of alternative investment opportunities. This allows investors to make informed decisions on which investment opportunities will provide the highest return on investment.

One Rationale for Using Expected Dividends in Valuation Is