6. Dividend reinvestment plans Aa Aa Dividend reinvestment plans (DRIPs) allow s

Question

6. Dividend reinvestment plans Aa Aa Dividend reinvestment plans (DRIPs) allow shareholders to reinvest their dividends in the company by purchasing additional shares instead of receiving cash dividend payments. 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 classified as either old stock or new stock plans. Galaxy Corporation plans to use the proceeds from its dividend reinvestment plan to repurchase shares of stock that it had previously issued. Which type of dividend reinvestment plan does this scenario describe? O A"new stock" dividend reinvestment plan O 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 start using new stock DRIPs if it equity capital. additional needs doesn't need

Explanation / Answer

Old stock reinvestment plan is to repurchase previouly issued shares (Option B)

Maximum level of participation

If company Needs additional capital, it will start using new stock DRIPs (Option A)

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.