Dividends are: \( \begin{array}{l}\text { a. paid only to preferred stockholders. } \\ \text { o b. only partially taxable to high-income individual shareholders. } \\ \text { o d. payable at the discretion of a firm's president. } \\ \text { e. paid out of aftertax profits.. }\end{array} \)

1. First, eliminate option **(a)** because dividends are not paid only to preferred stockholders; common shareholders can also receive dividends. 2. Next, consider **(b)**. While dividends may be subject to differential tax treatment (such as qualified dividends), stating that they are only "partially taxable to high-income individual shareholders" is misleading. Dividends received are generally taxable income though they may have preferential rates for qualified dividends. This option does not correctly capture the nature of dividends. 3. For **(c)**, dividends are declared by a firm's board of directors, not solely at the discretion of the firm's president. This makes option (c) incorrect. 4. Lastly, examine **(e)**. Dividends are typically paid out of a firm's after-tax profits, meaning the earnings, after paying taxes, can be distributed to shareholders as dividends. Thus, the correct answer is: \( \text{e. paid out of aftertax profits.} \)