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Describe the two possible market signals that investors perceive from a firm announcing an increase in its dividend payments to shareholders.
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- 1. Is stock bonus a real dividend payment in principle? 2. Briefly describe the information signaling effect caused by dividend reduction announcement (in terms of assumption and market reaction)Which of the following do/does NOT describe how shareholders accrue investment returns (Select all that apply)? Status and power Cash dividends Wage from invested companies Increased value of their stockDiscuss how changes in a firm’s operations might lead to changes in the required rate of return on the firm’s stock
- The optimal distribution strategy achieves a balance between capital gains and current dividends in order to raise the stock price of the company. true or falseThe 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’ profitabilityWhich of the following theories is supported by the argument that shareholders can transform a company dividend policy into a different policy by means of investors buying and selling on their own account? a. dividend irrelevance theory b. "bird-in-the-hand" theory C. residual distribution model d. tax preference theory
- Defined payout policy. What are the two main ways companies distribute earnings to investors?One of the most important components of stock valuation is a firm's estimated growth rate. Financial statements provide the information needed to estimate the growth rate. Consider this case: Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: • Pan Asia Mining Co.'s stock (Ticker: PAMC) is trading at $22.50. • The company has forecasted net income and book value of equity for the coming year to be $1,420,200 and $11,115,000, respectively. • The company has also been paying dividends for the past eight years and has maintained a dividend payout ratio of 45.000000%. Based on this information, Robert's forecast of PAMC's growth rate in earnings and dividends should be: 31.95% 7.03% 28.75% 8.62%Briefly describe the information signaling effect caused by dividend reduction announcement (in terms of assumption and market reaction)
- Describe the role that dividends and capital gains play in delivering returns to common stock investors.Describe the typical first-day return of an IPO andthe long-term returns to IPO investors.Which of the following represents the return a stockholder is actually earning on their investment: Dividend yield Earnings per share Return on equity