Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Question
Chapter 16, Problem 13PS
Summary Introduction
To determine: The reason why managers and investors are more concerned with changes in the cash dividend rather than the level of cash dividends.
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Students have asked these similar questions
Which of the following is not one of the primary considerations management must make before a cash
dividend is declared?
O The availability of funds to pay the dividend.
O The effect of inflation on the company and alternative uses of the cash to be paid for dividends.
O The legal permissability of the dividend.
O The tax impact on stockholders of the receipt of the dividends.
Dividend policy determines the ratio between the earnings distributed to shareholders and
the earnings retained in the company. Should the cash be reinvested in business operations
or should it be paid out to investors in equity? The decision might seem simple, but it provokes
a surprising number of controversies.
a) In relation to the above, discuss the different dividend policy theories.
b) Explain the Gordon's Dividend Valuation Model.
Cash dividends speak louder than words when it comes to conveying information about management’s expectations of the future of the business.’
Discuss what does the above sentence mean about dividend policy issues.
Chapter 16 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 16 - Prob. 1PSCh. 16 - Company dividend policy Here are several facts...Ch. 16 - Dividend payments Seashore Salt Co. has surplus...Ch. 16 - Repurchases Look again at Problem 3. Assume...Ch. 16 - Payout policy in perfect capital markets Go back...Ch. 16 - Dividends and stock price Go back to the first...Ch. 16 - Prob. 7PSCh. 16 - Repurchases and the DCF model Surf Turf Hotels is...Ch. 16 - Prob. 9PSCh. 16 - Payout and taxes Which of the following U.S....
Ch. 16 - Prob. 11PSCh. 16 - Prob. 13PSCh. 16 - Information content of dividends What is meant by...Ch. 16 - Information content of dividends Does the good...Ch. 16 - Prob. 16PSCh. 16 - Repurchases and the DCF model Little Oil has 1...Ch. 16 - Dividends and value We stated in Section 16-3 that...Ch. 16 - Prob. 19PSCh. 16 - Repurchases and the DCF model House of Haddock has...Ch. 16 - Prob. 21PSCh. 16 - Prob. 22PSCh. 16 - Repurchases and the DCF model Hors dAge...Ch. 16 - Repurchases An article on stock repurchase in the...Ch. 16 - Prob. 25PSCh. 16 - Information content of dividends Generous dividend...Ch. 16 - Repurchases and EPS Many companies use stock...Ch. 16 - Prob. 28PSCh. 16 - Dividend policy and the dividend discount model...Ch. 16 - Prob. 30PS
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Similar questions
- Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments, true or false?arrow_forwardWhen a firm is short of cash yet it wishes to distribute something to shareholders, it should consider a ________ a. Cash dividend b. Liquidating dividend c. Stock dividend d. Rights sharesarrow_forwardHow does the declaration of a cash dividend affect a company’s assets, liabilities, and equity?a. It results in an increase to liabilities and a decrease to stockholders’ equity, while assetsremain the same.b. It results in an increase to liabilities and a decrease to assets, while stockholders’ equityremains the same.c. It results in an increase to assets and a decrease to liabilities, while stockholders’ equityremains the same.d. It results in an increase to stockholders’ equity and a decrease to assets, while liabilitiesremain the samearrow_forward
- How does the market react to unexpected dividend changes? What does this tell us about dividendpolicy? How is it possible that dividends are so important, but at the same time, dividend policy isirrelevant?arrow_forwardA. Why is the goal of financial management to maximize the current share price of the company's stock and not the future share price?arrow_forwardWhy is it that the goal of financial management is maximization of shareholders’ wealth rather than maximization of profit?arrow_forward
- Which of the following is true about dividends: Group of answer choices Increasing dividends can impact retained earnings. Dividends must always be paid if the company makes profit. Dividends are split equally between stockholders and bondholders. Dividends paid reduce the net income that is reported on a company's income statement.arrow_forwardThe cost of retained earnings is less than the cost of ordinary shares because of *a. the issuance cost.b. agency costs of free cash flow.c. the taxation on earnings.d. the trust fund doctrine.arrow_forwardHow does the net present value (NPV) decision rule relate to the primary goal of financial management, which is creating wealth for shareholders?arrow_forward
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