Because money has a time value investors should prefer that dividends be paid sooner rather than later. Agree or disagree. Explain your answer with a numerical example

What will be an ideal response?

Answer: When investors buy a company's shares, they assume that the company will earn a rate of return on equity that equals or exceeds their required rate of return. If an investor requires a 10% rate of return and the company decides to defer a $100 dividend for a year, the company will reinvest the $100 at its ROE and it will grow to $110. Reinvesting the money will allow the firm to pay a later dividend that is large enough to provide the investor with her required rate of return. In other words, if an investor requires 10%, she should be indifferent between a $100 dividend now and a $110 dividend a year from now. Note that the 10% includes compensation for the risk of the future cash flow, the same risk the investor was willing to take when she bought the stock.