If a firm uses the residual dividend model to set dividend policy, then dividends are determined as a residual after providing for the equity required to fund the capital budget. Under this model, the higher the firm's debt ratio, the lower its payout ratio will be, other things held constant.
Answer the following statement true (T) or false (F)
False
Rationale: The higher the debt ratio, the more dollars of debt will be used to fund a given capital budget. So, the higher the debt ratio, the less equity will be needed, and this results in a higher dividend payout ratio according to the residual dividend model.
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A counteroffer ends the original offer and replaces it with a new offer
Indicate whether the statement is true or false