Despite the theoretical assertions of proponents of the dividend irrelevance theory, many investors do care about dividends. The table lists some

factors that might affect an investor's preference for dividends. Indicate whether each factor is likely to make an investor prefer to receive more or

fewer dividends.

Sportdyne Inc. is a typical company that is very concerned with meeting investors' expectations and keeping investors happy. Its earnings tend to

fluctuate from year to year because of the nature of the business the company is in$.$ Which of these statements most likely describes Sportdyne Inc.$\text{'}$s

dividend policy?

Sportdyne Inc. will pay a stable, predictable dividend because it will lower the firm's $r_s$ and increase the value of the firm.

Sportdyne Inc. will use a residual dividend policy because it will increase the firm's $r_s$ and increase the value of the firm.