The level of dividends a firm expects to pay is often directly related to how rapidly it expects to grow as well as the level of asset investments required.

Question

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The statement is true. Firms that expect rapid growth may choose to pay lower dividends to retain more earnings for investment and expansion. On the other hand, firms with lower growth prospects may choose to pay higher dividends to attract investors who seek steady income. Additionally, firms that require significant asset investments may choose to conserve cash by paying lower dividends.

The Level of Dividends a Firm Expects to Pay Is