As a corporation's investment opportunities increase, the dividend payout ratio should decrease so
that the corporation can avoid flotation costs.
Indicate whether the statement is true or false
TRUE
You might also like to view...
Which of the following is the correct order of stages that a buyer is assumed to pass through, by the four classic response hierarchy models?
A) cognitive stage—affective stage—behavioral stage B) affective stage—cognitive stage—behavioral stage C) behavioral stage—affective stage—cognitive stage D) cognitive stage—behavioral stage—affective stage E) affective stage—behavioral stage—cognitive stage
WineCellars Inc currently has a weighted average cost of capital of 12%. WineCellars has been
growing rapidly over the past several years, selling common stock in each year to finance its growth. However, due to difficult economic times this year, WineCellars decides to cut its dividend and increase its retained earnings so that the common equity portion of its capital structure will include only retained earnings and no new common stock will be sold. WineCellars' weighted average cost of capital this year should be A) equal to 12%. B) greater than 12%. C) zero, since no new stock will be sold. D) less than 12%.