After Being Spun-Off by a Venture Capital Company, Web Dynamics

Multiple Choice

After being spun-off by a venture capital company, Web Dynamics Ltd., an e-commerce site design company, has had difficulty finding debt financing due to high rates of its hardware and software obsolescence. How much dividends should Web Dynamics pay out?

A) No or low dividends to use the cash for reinvestment in the company.
B) High dividends to increase the profile of the company and improve chances for debt financing.
C) No or low dividends to increase equity, improving the ROCE ratio and its appeal to lenders.
D) Pay high dividends to attract financing through common share issue.
E) Pay high dividends to reduce taxes by writing off the cost of dividends against income, thus, freeing up income for reinvestment in the company.