Kappa Corp has just raised its dividend from $2.50 to $5 per share.(It plans to reduce its repurchases by a similar amount.)Caterina Chekov,who owns 100 shares of Kappa does not need the extra cash.What can she do to offset the change in dividend policy?
A) reinvest the extra dividend in Kappa stock.
B) sell $250 of Kappa stock each year.
C) borrow $250 and invest it in Kappa stock.
D) Nothing. She should sell out and invest elsewhere.

Question

Quizplus · Accepted Answer

By reinvesting the extra dividend in Kappa stock, Caterina can increase her share ownership and potentially benefit from future increases in the stock price. This would also be a more tax-efficient option compared to selling shares each year or borrowing money to invest.

Kappa Corp Has Just Raised Its Dividend from $2