Question 5 State if the following statements are true or false about dividend policy. i. The resolution of uncertainty argument on dividend policy is based on the principle that investors perceive more distant dividends as subject to more risk and therefore they prefer near-term dividends. ii. The clientele effect is the concept that shareholders are attracted to firms that follow dividend policies consistent with their objectives. [Question 5 continues on the following page] Module Code: 5FNCE007W Page 4 of 9 iii. In a world with no external finance available, dividend policy should not follow a residual approach. iv. Large increase in dividends signals optimistic view whilst cut in dividends indicate gloomy future. v. Due to asymmetry of information that exists between investors and company management, investors consider dividends to convey new information on company prospects. [2 marks each - Total 10 marks]