The Sonic Sound Company, is listed on the stock exchange of its home country, Audioland. The senior management team of the company is reviewing its current dividend policy. The company has only ordinary shares equity $($common stock equity$).$ Currently, the company pays $10\%$ of annual profits after tax as dividends, as it has done for the past ten $(10)$ years. One of the company$$s directors is concerned that if the new project referred to in Section $1$ above is not a success and cash flow decreases, the company may not be able to continue to pay out $10\%$ of annual profits after tax and may not meet shareholders$$ expectations of annual dividend payments. In contrast, another one of the company$$s directors is of the opinion that shareholders would not be concerned about that situation, but has not explained why.

Required

Identify the factors the company$$s senior management team should consider when reviewing and possibly changing its current dividend policy, both in general terms and in the context of the proposed new project. In so doing critique and evaluate those factors, drawing upon, as appropriate, concepts and ideas from the module materials and associated readings.