Assume That Shareholders Have Exactly the Same Information as the Managers

question 40

Multiple Choice

Assume that shareholders have exactly the same information as the managers who make the financial decisions of the firm.If the managers always make rational investment decisions-that is, they purchase only positive net present value capital budgeting projects-which of the following dividend policies should investors prefer the managers follow? Consider everything else is equal.

• A) residual dividend
• B) constant payout ratio
• C) stable, predictable dividend
• D) low regular dividend plus extras
• E) It shouldn't matter which dividend policy the managers follow because each policy should maximise the value of the firm.

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Definitions:

Germinal Stage

The initial stage of human development lasting from conception to two weeks, characterized by rapid cell division and the beginning of cell differentiation.

Embryonic Stage

A period in prenatal development between the second and eighth weeks after fertilization, where significant growth and differentiation of the embryo occur.

Embryonic Stage

A phase of prenatal development that occurs from implantation through the eighth week of pregnancy, characterized by rapid growth and formation of major structures.

Zygote

The initial cell formed when a sperm cell fertilizes an egg cell, representing the earliest stage of embryonic development in sexually reproducing organisms.