What Does the Traditional View of Dividend Policy Say About

Multiple Choice

What does the traditional view of dividend policy say about a higher payout ratio?

A) It will depress the share value as shareholders must engage in the cost of searching out new investment opportunities.
B) It will artificially depress the share value of a company as the growth in dividends will be lower when the absolute amount of dividends is higher.
C) It will increase the share value of a company as shareholders will be attracted to the investment flexibility provided by liquidity.
D) It will depress the share value of a company as transactions cost must be subtracted from earnings for those shareholders who wish to retain their investment in the company.
E) It will increase the share value of a company as the rate of return demanded by investors will drop as the uncertainty of receiving dividends diminishes.