Economics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280595
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 9, Problem 1DQ
To determine
Advantages and disadvantages of holding shares.
Expert Solution & Answer
Explanation of Solution
Instead of paying dividends, company decide to plow back its earning. There is some advantages and disadvantages for this can be listed as follows.
Advantages: the productive investment of the firm will increase its profitability with the value of the share. It will help the stock holder to earn a higher dividend or can sell the stock with a higher price.
Dis advantage: if the company decide to plow back its earning it have the possibility to block your cash income in the form of dividend.
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Chapter 9 Solutions
Economics: Principles and Policy (MindTap Course List)
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