Which of the following statements is most correct?
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A. B. C. D. E.Explanation
The residual dividend model is a model in which the dividend paid is set equal to the actual earnings minus the amount of retained earnings necessary to finance the firm's optimal capital budget. Ther esidual dividend policy minimizes the costs to the company of raising outside funds, but it does not provide a stable cash flow to the investors and most investors prefer stable dividends.