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Answer: A profitable company with only a few positive NPV projects
**Explanation:** Option B is correct because: - A profitable company with limited positive NPV projects has excess cash that cannot be profitably reinvested - Returning cash to shareholders through dividends is the optimal use of funds in this situation - This follows the principle that companies should pay dividends when they have surplus cash beyond what's needed for profitable investments Fast-growing tech companies (Option A) typically need to reinvest all earnings for growth. Companies with volatile earnings (Option C) should maintain conservative dividend policies.
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All else being equal, a dividend increase would be most appropriate for which of the following companies?
A
A fast-growing tech company
B
A profitable company with only a few positive NPV projects
C
A company with volatile earnings that has posted strong profits in the current year