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Explain whether a constant payout ratio policy or a constant dollar payout policy for paying dividends would best suit a company in a cyclical industry.
- Explain whether a constant payout ratio policy or a constant dollar payout policy for paying dividends would best suit a company in a cyclical industry. Demonstrate the differences with a hypothetical numerical example showing EPS and DPS under each policy for four years. Refer to relevant theory in your answer.
- Provide two considerations relevant to deciding between a special dividend and a share buyback for making a one-off payout to shareholders.
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