The Problem with the Regular Dividend Policy from the Firm's

question 7

Multiple Choice

The problem with the regular dividend policy from the firm's perspective is that

• A) it increases the shareholders' uncertainty.
• B) if the firm's earnings drop, so does the dividend payment.
• C) even when earnings are low, the company must pay a fixed dividend.
• D) it bores the shareholders.

---

Definitions:

Future Cash Flows

Future cash flows refer to the projected flows of cash into and out of a company or project, vital for assessing its financial health and potential for growth or sustainability.

Value In Use

The present value of the future cash flows expected to be derived from an asset or cash-generating unit.

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in the time value of money calculations.

Goodwill

An intangible asset that represents the excess value of a company's fair market value over the net assets of a business it acquires.