Purchase Solution

Stocks Valuation

Not what you're looking for?

Ask Custom Question

Which choice is correct and why?

If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for that year (along with new debt according to the optimal debt/total assets ratio), the firm should pay
a. no dividends except out of past retained earnings.

b. no dividends to common stockholders.

c. dividends, in effect, out of a new issue of common stock.

d. dividends by borrowing the money (debt).

e. Either choice c or d could be used.

Purchase this Solution

Solution Preview

b) no dividends to common stockholders.
<br>A company if it has a policy of residual dividends , and it is given ...

Purchase this Solution

Free BrainMass Quizzes
Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.