Which of the following would impact management's decision regarding the proportion of earnings to be paid out in dividends and the proportion to be retained for reinvestment?
A)Investors' reinvestment opportunities
B)Tax considerations
C)The firm's reinvestment opportunities
D)All of the above

Question

Quizplus · Accepted Answer

All three factors mentioned would impact management's decision regarding the proportion of earnings to be paid out in dividends and the proportion to be retained for reinvestment. Investors' reinvestment opportunities would impact the demand for dividends and the need for the company to retain earnings for future investment. Tax considerations would impact the after-tax cost of paying dividends and the after-tax benefit of retained earnings. The firm's reinvestment opportunities would impact the potential benefits of retaining earnings for future investment versus paying out dividends.

Which of the Following Would Impact Management's Decision Regarding the Proportion