Multiple Choice

QUESTIONS Institutional investors may prefer dividends because they are not subject to taxes. O True False QUESTION 9 Dividends are smooth relative to earnings because lowering a dividend sends a bad signal to the market. True False QUESTION 10 Due to agency concerns, cutting a dividend to increase the free cash flows in the hands of managers should lower a firm's share price. True False QUESTION 11 After paying a $5 dividend, firm ABC's stock price fell from 63.25 to 59.35. What is the implied effective tax rate? O 22% O 6.57% O 25% QUESTION 12 An individual investor is subject to a 30 percent tax on dividends and 20 percent tax on capital gains, how much does the investor receive for $2/share in capital gains? O $1.4 O $1.5 C16