The greater a firm's dividend payout,the ________ likely it is that the stock's price will rise above the exercise price.

Question

Quizplus · Accepted Answer

A higher dividend payout means the firm is distributing more of its earnings to its shareholders, which reduces the amount of cash available for reinvestment in the firm's future growth. This could limit the firm's ability to generate higher future earnings and therefore limit its potential for capital appreciation. As a result, investors may prefer a lower dividend payout and instead reinvest their share of the earnings into the firm to benefit from potential future growth.

The Greater a Firm's Dividend Payout,the ________ Likely It Is