Pros and cons of announcing the future dividend policy Introduction: Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Question

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Answer 1

Question

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

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Students have asked these similar questions

Compute Ke and Kn under the following circumstances: a. D1= $5, P0=$70, g=8%, F=$7 b. D1=$0.22, P0=$28, g=7%, F=2.50 c. E1 (earnings at the end of period one) = $7, payout ratio equals 40 percent, P0= $30, g=6%, F=$2,20. Note: D1 is the earnings times the payout rate. d. D0 (dividend at the beginning of the first period) = $6, growth rate for dividends and earnings (g)=7%, P0=$60, F=$3. You will need to calculate D1 (the dividend after the first period).

Terrier Company is in a 45 percent tax bracket and has a bond outstanding that yields 11 percent to maturity. a. What is Terrier's after-tax cost of debt? b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax falls to 30 percent. What is Terrier's new aftertax cost of debt? c. Has the after-tax cost of debt gone up or down from part a to part b? Explain why.

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Answer 2

Question

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

Answer 6

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

Answer 7

Chapter 14, Problem 1Q

Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Answer 8

Expert Solution & Answer

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.

Answer 12

Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

Answer 13

Ch. 14 - Prob. 1Q Ch. 14 - The cost of retained earnings is less than the...Ch. 14 - Would it ever be rational for a firm to borrow...Ch. 14 - Modigliani and Miller (MM), on the one hand, and...Ch. 14 - How would each of the following changes tend to...Ch. 14 - One position expressed in the financial literature...Ch. 14 - Prob. 7Q Ch. 14 - What is the difference between a stock dividend...Ch. 14 - Most firms like to have their stock selling at a...Ch. 14 - Indicate whether the following statements are true...

Pros and cons of announcing the future dividend policy Introduction: Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

To Explain: Pros and cons of announcing the future dividend policy Introduction: Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Answer to Problem 1Q

Explanation of Solution

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Chapter 14 Solutions

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.