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Ladder Publishing's residual dividend policy: which factors will lead to an increase?

Ladder Publishing follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm's dividend per share?

a. The firm's net income increases.
b. The company increases the percentage of equity in its target capital structure.
c. The number of profitable potential projects increases.
d. Congress lowers the tax rate on capital gains. The remainder of the tax code is not changed.
e. Earnings are unchanged, but the firm issues new shares of common stock.

Discuss fully the reasons for your choice, then discuss briefly why the other choices are incorrect.

Solution Preview

Ladder Publishing follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm's dividend per share?

Discuss fully the reasons for your choice, then discuss briefly why the other choices are incorrect

a. The firm's net income increases.
Companies using the residual dividend policy choose to rely on internally ...

Solution Summary

This solution is comprised of a detailed explanation to answer which of the following factors would be most likely to lead to an increase in the firm's dividend per share.

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