While the argument of the irrelevance of corporate dividend policy in perfect capital markets has been very important in financial theory, there is also much controversy about dividend policy in the real world where market imperfections exist

To fund an increased dividend payout or a stock buyback three possible scenario were suggested: invest less, borrow more, or issue more stock. Taking into consideration company’s policy, it is more likely that eastboro management is willing to borrow a little bit more or issue more new stocks, and reject the third scenario which is investing less. Competition in the development of software and the integration of design and manufacturing has become severer. As a matter of fact Eastboro company even fell behind. To solve the problem of losing its position in the market, Eastboro company had to undergo some restructurings and increase development of CAD/CAM. It is believed that these measures will redefine the industry. Moreover it was expected increase in revenues due to new developed products. Growth in sales would depend on the creation of system improvements and add-on features. Since NPV of all projects is positive it is unlikely that the company would invest less.
On the other hand there is another opportunity to fund dividend payout through debt financing. ( raising money by selling bonds, bills or notes to individual or institutional investors). It should be noted that the company is against a high debt-to-equity ratio. Therefore debt-to-equity ratio can be only slightly increased. At the same time Too high level of financial leverage reduces the likelihood to pay dividends in the following years
Issuing more stocks also seems to be preferable to the company. Eastboro can raise some amount of money to pay out dividends.

high growth and investment opportunities will need the internally generated funds to finance those