Question
According to Graham, Dodd, and Cottle, which of the following is not a reason why firms should generally have a high dividend payout?
Multiple choice question.
Firms with high dividend payouts typically go bankrupt at a higher rate than firms that do not.
Everything else being equal, firms that pay higher dividends usually sell at a higher price.
The discounted value of near dividends is greater than the discounted value of distant dividends.
Multiple choice question.
Firms with high dividend payouts typically go bankrupt at a higher rate than firms that do not.
Everything else being equal, firms that pay higher dividends usually sell at a higher price.
The discounted value of near dividends is greater than the discounted value of distant dividends.
Answers
GPT-4o mini
The option that is not a reason why firms should generally have a high dividend payout according to Graham, Dodd, and Cottle is:
**Firms with high dividend payouts typically go bankrupt at a higher rate than firms that do not.**
This statement contradicts the commonly held view that high dividend payouts are associated with financially strong firms. The other two statements align with the reasons for higher dividend payouts, emphasizing the appeal of immediate cash returns to investors and the concept of the time value of money concerning dividends.
**Firms with high dividend payouts typically go bankrupt at a higher rate than firms that do not.**
This statement contradicts the commonly held view that high dividend payouts are associated with financially strong firms. The other two statements align with the reasons for higher dividend payouts, emphasizing the appeal of immediate cash returns to investors and the concept of the time value of money concerning dividends.