Question
In: Finance
If your stockholders are primarily very wealthy, which of thefollowing dividend policies would be best...
If your stockholders are primarily very wealthy, which of the following dividend policies would be best for your firm:
a) a fluctuating dividend policy with low payout ratio
b) a fluctuating dividend policy with steady payout ratio
c) a steady dividend policy with a low payout ratio
d) a steady dividend policy with a high payout ratio
Solutions
Expert Solution
If the stockholders are primarily wealthy then it means that they are not dependent on stock income/Dividend for they livelihood.
So they can afford to have a stock with Low payout ratio with fluctuations.
stockholders who are primarily wealthy wants growth in the company they invest & prefer reinvestment of dividend.
So a Low payout ratio will satisfy the need.
Answer: a fluctuating dividend policy with a low payout ratio.
Incorrect:
b. Because Low payout ratio will satisfy the need.
c- Because Steady payout, stockholders who are primarily wealthy have cushion for fluctuating dividend policy.
d. Because Low payout ratio will satisfy the need.
jeff jeffy answered 2 years agoRelated Solutions
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