Despite some theoretical assertions, many investors do care a great deal about dividends. They believe that sure dividends today (a bird in the hand) are less risky than a return in the form of capital gains in the future. The following table lists some factors that might affect an investor's preference for dividends. Indicate whether the given factors are likely to make an investor prefer to receive more or fewer dividends Investors Will Likely Prefer... More Dividends Fewer Dividends Factor Risk-averse investors prefer to minimize uncertainty with their expectations of income from their investment. When an investor dies, his or her heirs are not liable for taxes on the capital gains generated during the investor's life. They are only liable for the capital gains earned since the investor's death When investors receive dividends today, they may choose to reinvest or to consume goods. In examining investors' preferences for dividends, it is useful to begin with the concept of dividend irrelevance. Dividend irrelevance suggests that in a world with no taxes or brokerage (or transaction) costs, firms and investors are indifferent to the paying or receiving of dividends. However, as these restrictions are relaxed, various factors suggest that firms should pursue high or low payouts. One such factor is: Taxes on capital gains are deferred until the capital gain is realized, whereas taxes on dividends are due in the year in which they are received Based on the factor described, identify whether investors, in general, will tend to favor high or low payout ratios. Favor a high payout Favor a low payout