Solved

Investors Prefer Retained Earnings Over a Cash Dividend If Expected $\times$

Question 5

Multiple Choice

Investors prefer retained earnings over a cash dividend if expected returns,adjusted for their premiums due to risk,under which of the following conditions?

A) (After personal tax return outside the corporation) > (1 - T_C) $\times$ (Pre-tax return within the corporation)
B) (Pre-tax return within the corporation) > (1 - T_C) ² $\times$ (After personal tax return outside the corporation)
C) (Pre-tax return within the corporation) > (1 - T_C) $\times$ (After personal tax return outside the corporation)
D) (1 - T_C) $\times$ (Pre-tax return within the corporation) > (After personal tax return outside the corporation)