Answered

At Westonci.ca, we make it easy to get the answers you need from a community of informed and experienced contributors. Our platform provides a seamless experience for finding precise answers from a network of experienced professionals. Join our Q&A platform to connect with experts dedicated to providing accurate answers to your questions in various fields.

Suppose 5 years have gone by and the company has to make a decision on how to move forward. It can either pay out all earnings as dividends without considering any growth opportunities or choose a growth strategy where the company will expand into new lines of business in global markets. If the management chooses this strategy, the payout ratio will be reduced down to 20% from 35%, and the company will be able to maintain a growth rate of 7% forever. Which strategy should the management choose to maximize shareholder value

Sagot :

anthougo

Answer:

The management should choose the growth strategy.  It is always more rewarding and maximizes the shareholder value better than embarking on a payout strategy.

Explanation:

Choosing a payout strategy, which does not ensure growth, is not sustainable and does not maximize shareholder value.  Business expansion through market penetration, product development, market expansion, and diversification ensures business growth and maximizes shareholder wealth, enabling the company to pay out more in dividends stretched over longer streams.

Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.