=+5" (Examination level) Vale ple has the following profit-after-tax history and dividend-

per-share history:

Year Profit after tax Dividend per share This year 10,800,000 5.4 Last year

(t-1)

8,900,000 4.92 2 years ago

(F-2)

6,300,000 4.48 3 years ago

(1-3)

5,500,000 4.083 4 years ago

(1-4)

3,500,000 3.71 5 years ago

(1-5 2,600,000 3.38 Two years ago the number of issued ordinary shares was increased by 30 per cent

(during the financial year t - 1). Four years ago a rights issue doubled the number of shares (during the financial year t - 3). Today there are 100 million ordinary shares in issue with a total market value of £190m. Vale is quoted on the Alternative Investment Market. Vale's directors are committed to shareholder wealth maximisation.

Required a Explain the following dividend theories and models and relate them to Vale's policy:

dividends as a residual;

signalling;

clientele preferences.