Which of the Following Would Not Have an Influence on the Optimal

question 10

Multiple Choice

Which of the following would not have an influence on the optimal dividend policy?

• A) The possibility of accelerating or delaying investment projects.
• B) A strong shareholders' preference for current income versus capital gains.
• C) Bond indenture constraints.
• D) The costs associated with selling new common stock.
• E) All of the above can have an effect on dividend policy.

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Definitions:

Payback Period

The length of time required to recover the cost of an investment, calculated by dividing the initial investment by the annual cash inflow.

Discount Rate

The interest rate applied in determining the current valuation of future cash flows via discounted cash flow analysis.

Annual Cash Operating Costs

Annual Cash Operating Costs represent the total amount of money a business spends on operating activities during a year, excluding non-cash expenses.

Salvage Value

The projected value left in an asset after it has completed its useful life.