An investor will prefer a low 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)III only
C)I and II
D)II and III

Question

Quizplus · Accepted Answer

III only. An investor would prefer a low dividend if they face high personal taxes, as higher dividends would lead to a higher tax liability. Options I and II actually suggest scenarios where an investor might prefer a high dividend.

An Investor Will Prefer a Low Dividend If