1. Which one of the following would tend to favor a low-dividend payout?
Investors' desire for a high-dividend yield
Endowment fund investors who cannot spend principal
Higher tax rates on capital gains than on dividend income
Elimination of the tax deferral on capital gains
High flotation cost for equity issues
2. Normal cash dividends that are increased regularly tend to send which message?
The firm is discontinuing all stock repurchases.
The firm expects to be profitable.
The firm is planning on downsizing.
The firm is attempting to reduce its tax bill.
The dividends are expected to increase the firm’s agency costs.