Your Firm Adheres Strictly to the Residual Dividend Model

question 3

Multiple Choice

Your firm adheres strictly to the residual dividend model.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:

Dividends

Distributions from a company to its shareholders, derived from the company's earnings or accumulated savings.

Statutory Close Corporation Supplement

A legal provision or amendment that provides specific regulations and frameworks for closely held corporations.

Corporate Formalities

The procedures, rules, and policies that a corporation must follow to ensure legality and protect its shareholders.

Annual Meeting

A yearly gathering of the members or shareholders of an organization to discuss its performance, elect leadership, or make decisions on corporate issues.