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Dividend-Policy-Multiple-choice-v2 by ClassOf1

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Multiple choice questions on Dividend Policy.

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									              Sub: Finance                                                                        Topic: Dividend Policy


              Question:
              Multiple choice questions on Dividend Policy.

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              1. Matrix Corporation follows the residual dividend policy. In a year with an exceptionally large
              capital budget and normal earnings, the firm would most likely

                        a. Keep the same payout ratio as in a normal year.

                        b. Increase its payout ratio.

                        c. Decrease its payout ratio.



              2. Which of the following statements is most correct?

                        a. The tax code encourages companies to pay large dividends to their shareholders.

                        b. If your company has established a clientele of investors who prefer large dividends,
                           the company is unlikely to adopt a residual dividend policy.

                        c. If a firm follows a residual dividend policy, holding all else constant, its dividend
                           payout will tend to rise whenever the firm's investment opportunities improve.
   
								
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