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:

Change Management

The process of managing any change in an organization's processes, systems, or structure, involving planning, implementation, and monitoring.

Environmental Turbulence

The degree of change and instability in an organization's external environment, affecting its operations and strategies.

Environment Shift

Significant changes in the external surroundings that can impact an organization's strategy, operations, and competitiveness.

Ordered Systems

Systems that have been systematically organized in a structured manner.