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

question 40

Multiple Choice

If a firm adheres strictly to the residual dividend model,the issuance of new common stock would suggest that

• A) the dividend payout ratio has remained constant.
• B) the dividend payout ratio is increasing.
• C) no dividends will be paid during the year.
• D) the dividend payout ratio is decreasing.
• E) the dollar amount of capital investments had decreased.

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Definitions:

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.