U.S. public companies with “low” dividend payouts have payout ratios of 0 percent or less, firms with “medium” payouts have ratios between 1 and 48 percent, and

“high” payout firms have a ratio of 49 percent or more. Given these data, how would you classify the following firms in terms of their optimal payout policy

(high, medium, or low)?

• a successful pharmaceutical company • an electric utility • a manufacturer of consumer durables • a commercial bank • a start-up software company.

AppendixLO1