The majority of large companies offer dividend reinvestment plans to their stockholders. These plans allow stockholders to automatically reinvest their dividends in the stock of the firm paying the dividend. Dividend reinvestment plans can be classi?ed as either old stock or new stock plans. Praxis Company has raised $1 million in cash from its dividend reinvestment plan. The firm used these funds to purchase its stock on the open market. Which type of dividend reinvestment plan does this scenario describe? 0 A new stock dividend reinvestment plan 0 An old stock dividend reinvestment plan levels of participation in a dividend reinvestment program suggest that stockholders are content with the amount of cash dividends that the firm is paying out. Why do firms use dividend reinvestment plans? Companies decide to start, continue, or terminate their dividend reinvestment plans for their stockholders based on the firms' need for equity capital. A firm is likely to stop using new stock DRIPs if it additional equity capital.