PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 16, Problem 21PS
Dividends and value We stated in Section 16-3 that MM’s proof of dividend irrelevance assumes that new shares are sold at a fair price. Look back at Problem 19. Assume that new shares arc issued in year 1 at $10 a share. Show who gains and who loses. Is dividend policy still irrelevant? Why or why not?
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To what extent does the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate claims.
"The dividend discount model is used to find the price of a stock based on the expected dividends received by the shareholder and the discount rate. Therefore, all else constant, the price of a share of stock will increase if the discount rate decreases."
A) True
B) False
A company issues stock
dividends for several reasons:
Select one:
a. To reward investors
b.
To reduce the market price per
share of its stock
O c. All the options
O d. To continue dividends but
conserve cash
Chapter 16 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 16 - Dividend payments In 2017, Entergy paid a regular...Ch. 16 - Dividend payments Seashore Salt Co. has surplus...Ch. 16 - Repurchases Look again at Problem 2. Assume...Ch. 16 - Repurchases An article on stock repurchase in the...Ch. 16 - Company dividend policy Here are several facts...Ch. 16 - Prob. 7PSCh. 16 - Information content of dividends What is meant by...Ch. 16 - Information content of dividends Does the good...Ch. 16 - Information content of dividends Generous dividend...Ch. 16 - Prob. 11PS
Ch. 16 - Payout policy in perfect capital markets Go back...Ch. 16 - Payout policy in perfect capital markets Go back...Ch. 16 - Payout policy in perfect capital markets Respond...Ch. 16 - Prob. 15PSCh. 16 - Repurchases and the DCF model Hors dAge...Ch. 16 - Repurchases and the DCF model Surf Turf Hotels is...Ch. 16 - Repurchases and the DCF model House of Haddock has...Ch. 16 - Repurchases and the DCF model Little Oil has 1...Ch. 16 - Repurchases and EPS Many companies use stock...Ch. 16 - Dividends and value We stated in Section 16-3 that...Ch. 16 - Payout and valuation Look back one last time at...Ch. 16 - Dividend clienteles Mr. Milquetoast admires Warren...Ch. 16 - Prob. 24PSCh. 16 - Payout and taxes Which of the following U.S....Ch. 16 - Prob. 26PSCh. 16 - Prob. 27PSCh. 16 - Prob. 28PSCh. 16 - Dividend policy and the dividend discount model...Ch. 16 - Prob. 30PS
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- When a stock dividend is declared and issued: Multiple Cholce total stockholders' equity does not change. total paid-in capital does not change. retained earnings is normally decreased by the par value of the shares issued in the dividend. total pald-in capital is decreased by the market value of the shares issued in the dividend.arrow_forwardThe price of the new share after dividends are paid is showing as incorrect?arrow_forwardCHOICES A. Only Statement I is correctB. Only Statement II is falseC. Statements II and III are falseD. Only Statement III is falseE. All statements are correctarrow_forward
- CHOICES A. Only Statement I is correctB. Only Statement II is falseC. Statements II and III are falseD. Only Statement III is falseE. All statements are correctarrow_forwardStock Valuation. Why does the value of a share of stock depend on dividends? Based on the dividend growth model, what are the two components of the total return on a share of stock? A substantial percentage of the companies listed on the NYSE and the NASDAQ don’t pay dividends, but investors are nonetheless willing to buy shares in them. If the value of a share of stock depends on dividends, how is this possible?arrow_forwardWhat is the effect of purchasing treasury stock on a company’s earnings per share and return on equity, respectively? (Enter 1, 2, 3, or 4 that represents the correct answer.) No effect and no effect Decrease and decrease Increase and increase Increase and decreasearrow_forward
- All of the following is true about a Stock dividend except, Select one: a. The stock price declines proportionally after the dividend is paid b. The pre-dividend price is higher than the post-dividend price c. It is commonly expressed as a percentage d. The number of outstanding shares will decrease after a stock dividend.arrow_forwardAb. 127.arrow_forwardWhat effect would the calculation performed have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will the rate of return on equity (increase dividend per share by 1.75) support or inhibit that goal? Be sure to justify reasoning.arrow_forward
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