Explore BrainMass

Explore BrainMass

    Stocks Valuation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com March 4, 2021, 5:46 pm ad1c9bdddf
    https://brainmass.com/business/options/stocks-valuation-10451

    Solution Preview

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

    $2.49

    ADVERTISEMENT