Your Firm Follows a Strict Residual Dividend Policy

question 5

Multiple Choice

Your firm follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm's dividend per share?

• A) The firm's net income increases.
• B) The company increases the percentage of equity in its target capital structure.
• C) The number of profitable potential projects increases.
• D) Congress lowers the tax rate on capital gains, leaving the rest of the tax code unchanged.
• E) Earnings are unchanged, but the firm issues new shares of common stock.

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Definitions:

Carbon Dioxide Bubbles

Gas bubbles consisting of carbon dioxide, commonly observed when a carbonated drink is opened or during certain chemical reactions.

Dichlorobutanoic Acid

An organic compound consisting of a four-carbon chain carboxylic acid with two chlorine atoms attached, used in various chemical syntheses and potentially as an intermediate in the production of pharmaceuticals or pesticides.

Acidity

A measure of how many hydrogen ions are present in a solution, reflecting its capability to donate protons.

Increasing Order

A sequence arrangement from the lowest to the highest value, often used in chemistry to describe trends in properties or reactivities.