Question #16

Reading: Reading 15 Analysis of Dividends and Share Repurchases

PDF File: Reading 15 Analysis of Dividends and Share Repurchases.pdf

Page: 7

Status: Unattempted

Part of Context Group: Q16-17 First in Group
Shared Context
- Which of the following dividend policy is consistent with the Rainham Inc.'s proposed dividend policy of setting an initial dividend payout ratio to 30% and then increase this over the following five years to 70%? A) Residual dividend model. B) Dividend stability. C) Target payout ratio.
Question
The Commercial Director has mentioned four out of six factors that influence dividend policy. Which of the following is least likely to be one of the remaining two factors not mentioned?
Answer Choices:
A. Clientele effect
B. Taxation
C. Financial flexibility
Explanation
The six factors that affect dividend policy are: Availability of investment opportunities Future earnings volatility Financial flexibility Tax considerations Flotation costs Contractual and legal restrictions
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