1 The characteristics of a firm's dividend policy may include

I. Paying a dividend to reduce investor uncertainty.

II. A stock repurchase, rather than a regular dividend, when the company can reallocate profits into highly successful projects.

III. Paying dividends and issuing debt to finance new projects.

IV. A regular dividend increase when earnings stability is reduced.

A) I, II, III, and IV

B) I, II, and III

C) I and II

D) II and III

2 Which of the following is likely to lead to a decrease in a firm's dividend payout ratio, all else the same?

I. The outlook for the industry suggests low growth and a low rate of innovation for all firms in the industry.

II. The firm's operating earnings become more stable.

III. The firm's strategy changes as it enters new markets with greater investment opportunities.

A) II only

B) I and III

C) III only

D) I, II, and III