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Mitigating the free-cash-flow problem

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Reference no: EM131941137

Which of the following statement(s) about dividends are FALSE?

- Dividends are ineffective in mitigating the free-cash-flow problem because paying dividends is not mandatory and hence managers always have the option to stop paying dividends

- A firm can smooth its dividend payments across periods by adopting a residual dividend policy

- If a firm adopt a target payout policy, the firm pays the same percentage of net income as dividends across periods?

Question:

- 1 and 2 only

- 1 and 3 only

- 2 and 3 only

- none of the above

- all of the above

Reference no: EM131941137

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