Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 19, Problem 12CQ
Stock Repurchases How do you think this tax law change affects the relative attractiveness of stock repurchases compared to dividend payments?
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Would would an investor prefer to receive a distribution as a dividend?
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Lower tax rate on dividends than capital gains
Higher tax rate on dividends than capital gains
Greater certainity
Greater uncertainity
How are share repurchases an alternative to dividends, and why might investors prefer them?
Topic: Payout Policy
What are the drawback(s) of distributing dividends instead of retained earnings?
Chapter 19 Solutions
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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- How does the equity method discourage the manipulation of net income by investors?arrow_forward1. 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?arrow_forwardWhich of the following will increase the WACC for a tax-paying company? Decrease the proportion of equity financing Decrease the proportion of debt financing Decrease the market value of the equity Increase the market value of the debtarrow_forward
- What is the relative tax advantage of debt when corporate and personal taxes are considered? What is an imputation tax system? Briefly explain the chronology of dividend payment. Discuss different ways in which a firm can pay dividends to its shareholders. Briefly explain the information content of share repurchase. What is an option? Explain the term "call option" and "put option" with an example.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_forwardIn the absence of market imperfections and taxes, stock repurchases are sameas cash dividends. How does this change in real world circumstances and whateffect does a stock repurchase announcement have on stock price?arrow_forward
- If a company is thinking about distributing excesscash through a stock repurchase program in lieuof continuing to pay regular cash dividends, whatare some factors it should consider before makingthe change?arrow_forwardWhy dividends are not deductible?And what could be the order of priority regarding income and assets in terms of preferred or common stock?arrow_forward
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