CNCT ACC CORPORATE FINANCE
12th Edition
ISBN: 9781264604081
Author: Ross
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 19, Problem 18CQ
Summary Introduction
To determine: The Reasons for Dividend Policy being Irrelevant.
Introduction: The term dividends allude to that portion of proceeds of an organization which is circulated by the organization among its investors. It is the remuneration of the investors for investments made by them in the shares of the organization. A dividend policy is an organization's way to deal with disseminating revenues back to its proprietors or investors. In the event that an organization is in a development stage, it might conclude that it won't pay profits, but instead re-contribute its
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Students have asked these similar questions
Historically small firm stocks have earned higher returns than large firm stocks. When viewed in the context of CAPM theory, this suggests that ____________.
Group of answer choices
small firms are better run than large firms
government subsidies available to small firms produce effects that are discernible in stock market statistics
small firms must be systematically riskier than large firms
small firms are mis-priced
Which is NOT a potential explanation for IPO short-term underpricing?
Underwriters can unload more shares at a lower price.
High returns on the first trading day attracts investors.
Due to asymmetric information, firms need to lower price so outside investors are willing to invest.
Firms want to raise more capital
In examining investors’ preferences for dividends, it is useful to begin with the concept of dividend irrelevance. Dividend irrelevance suggests that in a world with no taxes or brokerage (or transaction) costs, firms and investors are indifferent to the paying or receiving of dividends.
However, as these restrictions are relaxed, various factors suggest that firms should pursue high or low payouts. One such factor is:
Dividends received far into the future are significantly more uncertain than dividends received in the near future.
Based on the factor described, identify whether investors, in general, will tend to favor high or low payout ratios.
Favor a high payout
Favor a low payout
Chapter 19 Solutions
CNCT ACC CORPORATE FINANCE
Ch. 19 - Dividend Policy Irrelevance How is it possible...Ch. 19 - Stock Repurchases What is the impact of a stock...Ch. 19 - Dividend Policy It is sometimes suggested that...Ch. 19 - Dividend Chronology On Tuesday, December 8,...Ch. 19 - Prob. 5CQCh. 19 - Prob. 6CQCh. 19 - Dividends and Stock Price Last month, Central...Ch. 19 - Prob. 8CQCh. 19 - Dividend Policy For initial public offerings of...Ch. 19 - Investment and Dividends The Phew Charitable Trust...
Ch. 19 - Use the following information to answer the next...Ch. 19 - Stock Repurchases How do you think this tax law...Ch. 19 - Dividends and Stock Value The growing perpetuity...Ch. 19 - Bird-in-the-Hand Argument The bird-in-the-hand...Ch. 19 - Dividends and Income Preference The desire for...Ch. 19 - Dividends and Clientele Cap Henderson owns Neotech...Ch. 19 - Prob. 17CQCh. 19 - Prob. 18CQCh. 19 - Prob. 19CQCh. 19 - Prob. 20CQCh. 19 - Prob. 1MCCh. 19 - Jessica believes that the company should use the...Ch. 19 - Prob. 3MCCh. 19 - Another option discussed by Tom, Jessica, and...Ch. 19 - Prob. 5MCCh. 19 - Does the question of whether the company should...
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