(a) What happens to an Australian listed company's share price on the ex-dividend date and why? (b) Tunnel Limited is a listed company that pays regular cash dividends. Its earnings and capital expenditures are normally very stable and this is expected to continue. However, the company recently received a large, one-off cash inflow and now has excess cash on hand. It would like to distribute this cash to shareholders. i. ii. Should the company increase its regular dividend to pay out this cash? Why or why not? Name two theories that support your answer. Name one appropriate alternative to increasing the regular dividend in order to pay out this additional cash?
(a) What happens to an Australian listed company's share price on the ex-dividend date and why? (b) Tunnel Limited is a listed company that pays regular cash dividends. Its earnings and capital expenditures are normally very stable and this is expected to continue. However, the company recently received a large, one-off cash inflow and now has excess cash on hand. It would like to distribute this cash to shareholders. i. ii. Should the company increase its regular dividend to pay out this cash? Why or why not? Name two theories that support your answer. Name one appropriate alternative to increasing the regular dividend in order to pay out this additional cash?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:(a) What happens to an Australian listed company's share price on the ex-dividend
date and why?
(b) Tunnel Limited is a listed company that pays regular cash dividends. Its earnings
and capital expenditures are normally very stable and this is expected to continue.
However, the company recently received a large, one-off cash inflow and now has
excess cash on hand. It would like to distribute this cash to shareholders.
i. Should the company increase its regular dividend to pay out this cash? Why
or why not? Name two theories that support your answer.
Name one appropriate alternative to increasing the regular dividend in order
to pay out this additional cash?
ii.
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