Question

what does the residual dividend model mean for investors?

they should expect to consistently receive the same dividend.

they should expect to always receive very small dividends.

they should expect a level of uncertainty regarding their dividends.

they should expect dividend distributions that are equal to net income.

Explanation:

The residual dividend model determines dividends based on leftover earnings after funding capital projects. So dividends vary with investment opportunities, creating uncertainty for investors. The first option is wrong (residual model doesn't ensure consistent dividends). The second is wrong (dividends aren't always small, they depend on earnings and investments). The fourth is wrong (dividends are residual, not equal to net income). The third option correctly states investors face dividend uncertainty.

Answer:

C. They should expect a level of uncertainty regarding their dividends. (Note: Assuming the third option is labeled C; if original labels differ, adjust identifier but keep the text. Based on the options, the correct one is "They should expect a level of uncertainty regarding their dividends.")