Optimal Dividend Policy

Factors Influencing Optimal Dividend Policy

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Which of the following would not have an influence on the optimal dividend policy?

A. The costs associated with selling new common stock.

B. All of these statements can have an effect on dividend policy.

C. Bond indenture constraints.

D. A strong shareholders' preference for current income versus capital gains.

E. The possibility of accelerating or delaying investment projects.

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A. B. C. D. E.

The optimal payout ratio is a function of 4 factors:

1. Investors' preferences for dividends versus capital gains.

2. The firm's investment opportunities.

3. The firm's target capital structure.

4. The availability and cost of external capital.

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