If a Firm Adheres Strictly to the Residual Dividend Policy,and

question 55

Multiple Choice

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

• A) the same dividend as it paid the prior year.
• B) no dividends to common stockholders.
• C) dividends only out of funds raised by the sale of new common stock.
• D) dividends only out of funds raised by borrowing money (i.e. ,issuing debt).
• E) dividends only out of funds raised by selling off fixed assets.

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Definitions:

Recognizing One's Emotions

The ability of an individual to identify and understand their own emotional states.

Capabilities

The skills, knowledge, and resources an organization or individual possesses that enable them to achieve objectives and perform effectively.

Intense Dislike

A strong feeling of aversion or antipathy towards someone or something.

Attitude

An established attitude or emotional stance towards a person or thing, often shown through how one acts.