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
Is a company's dividend policy payment important? Please explain why or why not
1. What are the company motives for declaring dividends or stock repurchase programs?
2. How would you argue for a significant increase in both dividends and repurchases instead of using the available cash to make investments, i.e. M&A?
3. Would the tax treatment of dividend income versus capital gains income affect the managers’ decisions to disburse cash via dividends versus stock repurchases?
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.
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
- 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.arrow_forwardMeasures of a company's liquidity are concerned with the frequency and amounts of dividend payments, true or false?arrow_forwardCash 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.arrow_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_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_forwardTopic: Payout Policy What are the drawback(s) of distributing dividends instead of retained earnings?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_forwardThe idea that changes in dividend policy reflects managers' views about the firm's future earnings is known as: a) Modigliani and Miller Theory b) Payoff Theory c) Dividend Signaling Hypothesis d) Pecking Order Hypothesisarrow_forward
- Why do firms change their dividends policy?arrow_forwardTo what extent does the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate claims.arrow_forwardExplain "frce cash flows. Why do managers like to retain free cash flows instead of distributing it to shareholders? Discuss what mechanisms may be used to solve this problem?arrow_forward
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