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Dr. Amit
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. If a firm adheres strictly to the residual dividend policy,

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. If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio), then the firm should pay
a. no dividends except out of past retained earnings.
b. no dividends to common stockholders.
c. dividends only out of funds raised by the sale of new common stock.
d. dividends only out of funds raised by borrowing money (i.e., issue debt).
e. dividends only out of funds raised by selling off fixed assets.
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Customer: replied 6 years ago.

If a firm adheres strictly to the residual policy with all distributions in the form of dividends , a sale of new ordinary shares by the company would suggest that

a) the dividend payout ratio has remained constant

b) the dividend ratio is increasing

c)No dividends were paid for the year

d)The dividend payout ratio is decreasing

e)The rand amount of investments has decreased

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