Question #63
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 25
Status: Correct
Correct Answer: C
Question
In which of the following stages is a firm most likely to distribute the highest proportion of its earnings in the form of dividends?
Answer Choices:
A. Initial growth stage
B. Transition stage
C. Mature stage
Explanation
As a firm matures, the forces of competition begin to deny it opportunities to earn greater
than the required return. Faced with this situation, most earnings are distributed to
shareholders as dividends. An alternate way of returning capital is through stock
repurchases.