The passive residual dividend policy seems to be inconsistent with a ____.
A) world having significant transactions costs associated with new stock issues
B) stable dividend policy
C) policy of paying only stock dividends
D) share-repurchase policy

Question

Quizplus · Accepted Answer

The passive residual dividend policy is based on the idea that the company should first invest in all available positive NPV projects and then distribute any remaining earnings as dividends. This approach is inconsistent with a stable dividend policy, where the company aims to pay a consistent and predictable dividend to its shareholders. The passive residual policy may result in fluctuating dividend payments, depending on the availability of positive NPV projects and the company's investment needs. The other options (A, C, D) are not directly related to the passive residual dividend policy.

The Passive Residual Dividend Policy Seems to Be Inconsistent with a ____