Cap Henderson owns Neotech stock because its price has been steadily rising over the past few years and he expects this performance to continue. Cap is trying to convince Sarah Jones to purchase some Neotech stock, but she is reluctant because Neotech has never paid a dividend. She depends on steady dividends to provide her with income.
a. What preferences are these two investors demonstrating?
b. What argument should Cap use to convince Sarah that Neotech stock is the stock for her?
c. Why might Cap’s argument not convince Sarah?