PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 16, Problem 7PS
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
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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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
- The most important factor to consider when determining the dividends to be declared is a. the impact of inflation on replacement costs b. any future planned use of retained earnings d. the future planned use of cash available at the date of dividend distribution e. shareholders’ expectation about the firms’ profitabilityarrow_forwardTopic: Payout Policy What are the drawback(s) of distributing dividends instead of retained earnings?arrow_forwardWhy do firms change their dividends policy?arrow_forward
- Why would a company’s return on total assets be different from its return on common stockholders’ equity?arrow_forwardHow 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_forwardWhat does a positive operating cash flow mean for a company? What do a positive cash flow from assets, a positive cash flow to creditors and a positive cash flow to stockholders mean? What do these positive cash flows mean for an expansion plan financed by debt and equity?arrow_forward
- what is the need to conduct the Solvency Analysis when the liquidity analysis serves the purpose of checking the cash position and liability paying condition of the company? What does PE Ratio tell the investors? Is there any difference between PE ratio, EPS and DPS (Dividend per Share), what insights both ratios provide to the investors? Which category of stakeholders rely on these two ratios? What is the difference between DPS and Dividend Yeild? answer full question pleasearrow_forwardHow can processes, policies and controls related to a company’s finance and investment cycle affect the company’s cash flow, audit opinion, market share and stock price?arrow_forwardWhich 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_forward
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