If a Firm Uses the Residual Dividend Model to Set

question 2

True/False

If a firm uses the residual dividend model to set dividend policy,then dividends are determined as a residual after providing for the equity required to fund the capital budget.Under this model,the better the firm's investment opportunities,the lower its payout ratio will be,other things held constant.

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Definitions:

Diverse Set

A collection with a variety of distinct elements or members, often referring to a group of people with differing characteristics.

Stocks

Financial instruments representing ownership in a company, entitling the holder to a share of the corporation's assets and profits.

Expected Real Rate

The anticipated return on an investment after adjusting for inflation, representing the true growth of purchasing power.

Ownership

The legal right to possess, use, and dispose of anything ranging from physical goods to intellectual property.