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NEW QUESTION: 1
Which of the following conditions must be satisfied for a stable dividend policy to result from the Residual Dividend Policy?
I. The earnings of a firm must be stable.
II. Investor preference for dividends must be stable.
III. The investment opportunities available to the firm must be stable.
IV. There should be no signaling effects involved.
A. II only
B. I & III
C. I & II
D. III & IV
E. III only
F. I only
G. I, III & IV
Answer: B
Explanation:
Explanation/Reference:
Explanation:
Under the Residual Dividend Policy, a firm first determines the amount of capital it requires for sufficiently profitable projects. It then uses retained earnings to supply equity capital and raises debt in the proper amount to maintain the target capital structure. If any earnings are left over after this, they are paid out as dividends. If not, the firm will not only not pay any dividends but also issues new equity for financing. Thus, for this to lead to stable dividends, one must have stability in earnings and available investment opportunities. Note that for positive dividends, earnings must exceed capital requirements under the Residual Dividend Policy.

NEW QUESTION: 2

A. Option B
B. Option C
C. Option D
D. Option A
Answer: D

NEW QUESTION: 3
Crosswind Custom Homes is building a customer's dream house. However, rain has delayed the finish by two weeks. The Project Manager is evaluating options to make up the lost time. After discussing the various options with senior management, the Project Manager has decided to fast track the project. By doing so, the Project Manager could be adding what to the project?
A. Scope change
B. Risk
C. Time change
D. Responsibility
Answer: B