Which of the following factors affect(s) a firm's optimal pay-out ratio?
I. The availability and cost of external capital.
II. The investment opportunities available.
III. The firm's target debt-to-equity ratio.
IV. Investors' preference for dividends versus capital gains.
Click on the arrows to vote for the correct answer
A. B. C. D. E. F. G. H.Explanation
A firm must consider all of these factors while determining what fraction of the earnings it should pay out. It should be noted that another factor that must be considered is the capability of keeping the dividends stable over time.