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The residual theory of dividends connects a firm's dividend policy and its level of capital investments....

The residual theory of dividends connects a firm's dividend policy and its level of capital investments.

True or False

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Answer #1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS TRUE.

The residual theory of dividends states that dividends will only be paid from leftovers after the planned capital expenditure.

Hence, higher the level of capital investments, the lower the dividends and lower the level of capital investments, higher the dividends.

I hope this solves your doubt.

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