7. Dividend reinvestment plans Dividend reinvestment plans (DRIPs) allow shareholders to reinvest their dividends in the company by purchasing additional shares instead of recelving cash dividend payments. The majority of large companies offer dividend reinvestment plans to their stockholders. These plans allow stockholders to automatically reinvest their dividends in the stock of the firm paying the dividend. Dividend reinvestment plans can be classified as either existing stack or newiy issued stock plans. Understanding how dividend reinvestment plans work dividend reinvestment program invests the dividends in newly iswued stock. This fype of plan raises new capital for the nim Galaxy Corporation needs to raise a significant amount of new capital, so it is going to use cash raised from its dividend reinvestment plan as new equity capital for the firm. Which type of dividend reinvestment plan does this scenario describe? An existing stock dividend reinvestmem plan A newly issued stock dividend reinvestment plan