Evaluating Dividend Policy on Wealth Maximization

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First, let's define some terms:

Dividends are a distribution of profits from a corporation to the owners (shareholders).

Dividends decrease the net asset value of a corporation, and cause the double-taxation problem (they are not deductible by the corporation, but are taxable by the individual.)

Dividend policy is a decision of the management or Board of Directors about how much to pay out of a corporation to its owners (shareholders) in dividends.

Wealth maximization has to do with how much of the profits should be retained inside the corporation to be used to maximize future profits of the ...