Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Textbook Question
Chapter 11, Problem 1QE
Explain the theory behind the dividends-based valuation approach. Why are dividends value-relevant to common equity shareholders?
Expert Solution & Answer
To determine
Explain the theory behind the dividends-based valuation approach, and also discuss the value-relevant to common equity shareholders.
Explanation of Solution
Cash dividend:
The amount of cash provided by a company out of its distributable profits as a return for the amount invested by them is referred as cash dividend.
Straightforward is the theory behind the dividends-based valuation approach. As the dividends are cash flows directly to the equity shareholders, dividends are value-relevant to common equity shareholders.
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Chapter 11 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY