Suppose a Firm Adheres Strictly to the Residual Dividend Policy

question 25

Multiple Choice

Suppose a firm adheres strictly to the residual dividend policy and its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio) .What should the firm pay?

• A)no dividends except out of past retained earnings
• 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 selling off fixed assets

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Definitions:

Chemical Pollutants

Substances introduced into the environment that are man-made or naturally occurring chemicals, causing harm or risk to living organisms.

Feedback Loop

A system where the outputs loop back as inputs, influencing the process and potentially leading to self-amplifying or self-dampening outcomes.

Junk Science

Information or analysis claimed to be scientific but lacking in integrity, rigor, or adherence to established standards and methods.

Phase Change

A transition among the basic states of matter: solid, liquid, and gas, involving energy changes without altering the chemical composition of a substance.