All of the following conclusions on the importance of a dividend policy are true

Question

All of the following conclusions on the importance of a dividend policy are true except:

- As a firm's investment opportunities increase, the dividend payout ratio should decrease.
- The firm's expected earning power and the riskiness of these earnings are more
important to the investor than the dividend policy.
- Dividends may influence stock price by the investor's desire to minimize and/or defer taxes and from the role of dividends in minimizing agency costs.
- In order to avoid surprising investors, management should anticipate financing needs for the short-term, but not for the long term.

Explanation / Answer

All of the following conclusions on the importance of a dividend policy are true except: As a firm's investment opportunities increase, the dividend payout ratio should decrease.

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