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:

Voting Yes

An affirmative action taken in the context of an election or decision-making process, indicating support for a proposal or candidate.

Union Election

A formal voting process in which workers decide whether to be represented by a labor union, or elect union leadership, adhering to specific legal and regulatory guidelines.

Individualistic

Oriented around the belief that individual interests and rights are paramount; in a workplace context, this can refer to systems or cultures prioritizing individual achievement over collective goals.

Unionized

Referring to workplaces or employees that are represented by a labor union, which negotiates wages, benefits, and working conditions on their behalf.