An investor will prefer a high dividend if:
I.the firm cannot reinvest the funds in projects where the yields exceed those that a shareholder could get elsewhere.
II.the investor needs a high level of current income.
III.the investor faces high personal taxes.
A)I only
B)II only
C)I and II
D)I and III

Question

Quizplus · Accepted Answer

The first reason (I) suggests that if the firm cannot reinvest the funds in projects with greater returns, the investor would prefer a high dividend. The second reason (II) indicates that if the investor needs current income, they would prefer a high dividend. Therefore, options I and II together support the preference for a high dividend. Option III is not necessarily true for all investors, but it could be a valid reason for some, and it does not contradict the other options.

An Investor Will Prefer a High Dividend If