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Question
Everything else equal, generally a firm will set a low dividend payout ratio and finance capital budgeting projects using retained earnings rather than through the sale of new common stock when the:
a. flotation costs associated with a stock issue are high.
b. senior management team wants to dilute the firm's ownership.
c. firm faces no constraints with regard to the distribution of earnings.
d. firm's annual earnings increase.
e. firm has fewer acceptable capital budgeting projects than in previous years.
Answer
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