Question

when is a company more likely to adopt the residual dividend model?

○ when share prices are falling

○ when it is in a high growth stage

○ when current investors expect high dividends

○ when it is in a low growth stage

Explanation:

The residual dividend model prioritizes reinvesting earnings into profitable projects before paying dividends. High - growth companies have many profitable investment opportunities, so they retain earnings (use residual dividend approach) to fund growth. Falling share prices don't directly relate to adopting this model. High - dividend - expecting investors would make a company less likely to use residual (as it pays less dividends). Low - growth companies have fewer investment opportunities and are more likely to pay out dividends rather than use residual. So a company in a high - growth stage is more likely to adopt the residual dividend model.

Answer:

B. When it is in a high growth stage