Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Define each of the following terms:
a. Optimal distribution policy
b. Dividend irrelevance theory; bird-in-the-hand theory; tax effect theory
c. Signaling hypothesis; clientele effect
d. Residual distribution model; extra dividend
e. Declaration date; holder-of-record date; ex-dividend date; payment date
f. Dividend reinvestment plan (DRIP)
g. Stock split; stock dividend; stock repurchase
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- Why do the clientele effect and the information contenthypotheses imply that investors prefer stable dividends?arrow_forwardWhen using discounted dividend method to estimate stock price, which of the following should be used as the discount rate? - required return of debt - risk free rate - required return of the equity - WACC - Bank deposit ratearrow_forwardThe optimal distribution strategy achieves a balance between capital gains and current dividends in order to raise the stock price of the company. true or falsearrow_forward
- To identify the cost of equity, which models are better: The dividend growth model or CAPM-derived cost of equity?arrow_forwardThe 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_forwardDefine each of the following terms:a. Target payout ratio; optimal dividend policyb. Dividend irrelevance theory; bird-in-the-hand fallacyc. Information content (signaling) hypothesis; clienteles; clientele effectd. Catering theory; residual dividend modele. Low-regular-dividend-plus-extrasf. Declaration date; holder-of-record date; ex-dividend date; payment dateg. Dividend reinvestment plan (DRIP)h. Stock split; stock dividendi. Stock repurchasearrow_forward
- Define the term Return on Common Equity? How does it measure profitability?arrow_forwardThe terms “irrelevance,” “dividend preference”(or “bird-in-the-hand”), and “tax effect” havebeen used to describe three major theoriesregarding the way dividend payouts affect afirm’s value. Explain these terms, and brieflydescribe each theory.arrow_forwardWhat are dividend reinvestment plans?arrow_forward
- Which model is typically used to estimate the cost of using external equity capital? Group of answer choices capital asset pricing model rate of return on perpetuity model arbitrage pricing theory model dividend valuation modelarrow_forwardHow to calculate preferred dividends?arrow_forward(please correct answer and question information)arrow_forward
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