If a Firm Adheres Strictly to the Residual Dividend Model,then

question 49

Multiple Choice

If a firm adheres strictly to the residual dividend model,then if its optimal capital budget requires the use of all earnings for that year (along with new debt according to the optimal debt/total assets ratio) ,the firm should pay

• A) No dividends except out of past retained earnings.
• B) No dividends to common stockholders.
• C) Dividends,in effect,out of a new issue of common stock.
• D) Dividends by borrowing the money (debt).
• E) Either c or d above could be used.

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Definitions:

Authoritarian

A leadership or government style characterized by strong central power and limited political freedoms.

Democratic

Pertaining to a form of government where power is vested in the hands of the people, either directly or through elected representatives.

Delegated Authority

The transfer of authority and responsibilities from one party to another, often within the context of organizational hierarchy or governance.

Human Factors Psychologists

Psychologists who study how people interact with machines and technology to improve safety, efficiency, and product design.