Question 1

A) By considering personal tax rates for dividend income and capital gains, one could argue that Group of answer choices dividend policy does not affect shareholder wealth. high dividends and low capital gains are best for shareholders.

low dividends and high capital gains are best for shareholders.

a residual dividend policy is best for shareholders.

only investors in higher tax brackets would prefer high dividends.

B) Stock dividends

decrease the number of shares outstanding.

may increase the value of the firm due to information content.

are preferred by investors who desire capital gains.

increase the number of shares outstanding.

decrease the common stock account by the amount of the split.