While Rogue Corporation has been in business for over 50 years, newly developed

Question

While Rogue Corporation has been in business for over 50 years, newly developed products pushed the firm's year-over-year growth rate to 35% during the latest three years. The firm is proud of its history of paying dividends, but the vigorous recent growth of the firm has left it cash challenged. Which of the following policies/procedures would you consider best under the circumstances?

Select one:

a. Enter into a long-term stock repurchase program.

b. Look seriously for a merger partner.

c. Substitute a stock dividend for the current cash dividend.

d. Borrow long-term to pay the current dividend.

Explanation / Answer

In the given case, the firm has low level of cash balance and the firm wants to pay dividend, so the firm can use stock dividend as the best alternative of cash dividend. Thus, the correct answer is option c.

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