Firms should follow a constant dividend payout ratio policy

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Reference no: EM13726474

1. Which of the following is (are) true?

a. In industries with volatile earnings, the residual dividend policy results in the most consistent dividend stream.

b. If the clientele effect is correct, firms should follow a constant dividend payout ratio policy.

c. In general, the higher the number of positive NPV investment opportunities for a firm, the lower the dividend payout ratio.

d. According to the informational content of dividends, an increase in dividends is always a positive signal.

2. Farrah owns 5,000 shares of stock in DAS, Inc. with a market value of $15,000.DAS declares a 20% stock dividend. After the dividend is paid, Farrah owns

a. 6,000 shares with a market value of $15,000.

b. 6,000 shares with a market value of $18,000.

c. 5,000 shares with a market value of $18,000.

 

d. 5,100 shares with a market value of $15,300.

Reference no: EM13726474

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