Homework Answers
When firms' earnings fluctuate, they tend to adjust their payout policy by allowing share repurchases to fluctuate while holding dividends relatively steady.
This is mainly done because of the signalling theory. It implies that consistent dividends signal positive and growing potential of the business of the company. Dividend-cut is viewed as a negative phenomenon. Hence, when firms' earnings fluctuate, they try to keep their dividends steady.
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19 When firms earnings fluctuate, they tend to adjust their payout policy by O When firms...
Which of the following statements is correct? a. One advantage of the residual dividend policy is...
Which of the following statements is correct? a. One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like. b. An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM. c. If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price. d....
Which of the following statements is CORRECT? If the "clientele effect" is correct, then for a...
Which of the following statements is CORRECT? If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price. An increase in the stock price when a company decreases its dividend is consistent with signaling theory. Firms with a large number of investment opportunities and a relatively small amount of cash tend to have above average dividend payout ratios. One advantage of the...
Question 5 (1 point) Saved "Growth" companies often payout a low percentage of their annual earnings...
Question 5 (1 point) Saved "Growth" companies often payout a low percentage of their annual earnings in the form of dividends because, these companies tend to reinvest earnings generated by their operations into the their business to help finance their growth. Whereas "mature" companies that lack significant growth opportunities often distribute a high percentage of their net income as dividends. True False Part B Question 6 (1 point) On March 13th, The Company declares a $3.00 cash dividend. The Company...
Please answer all parts. thank you! Low-regular-and-extra dividend policy Bennett Farm Equipment Sales, Inc. is in...
Please answer all parts. thank you!
Low-regular-and-extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 25 %, its board realizes that strict adherence to that ratio would result in a fuctuating dividend and create uncertainty for the firm's stockholders. Therefore, the firm has declared a regular dividend of $0.60 per share per year with extra cash dividends to be paid when earnings justify them. Earnings per...
Low-regular and extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business....
Low-regular and extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 30%, its board realizes that strict adherence to that ratio would result in a Puctuating dividend and create uncertainty for the firm's stockholders. Therefore, the firm has declared a regular dividend of $040 per share per year with extra cash dividends to be paid when earnings justify them. Eamnings per share for the last several...
9. Factors that influence dividend policy Аа Аа Distribution decisions are complicated and involve the understanding...
9. Factors that influence dividend policy Аа Аа Distribution decisions are complicated and involve the understanding of critical strategic factors that affect the policy and value of a firm. Thus, the management of any firm has to consider the constraints on dividend payments, the availability and cost of alternative sources of capital, and other external factors when they create and implement their distribution policy. Consider the following restriction: Restrictions on dividend payments not to exceed the total amount of retained...
Companies with excess cash often employ share repurchase plans in place of or along with cash dividends
9. Stock repurchases Companies with excess cash often employ share repurchase plans in place of or along with cash dividends. Share repurchase plans can help investors liquidate their holdings by selling their stock to the issuing company and earning from capital gains. Consider the case of St. Sebastian Inc.:St. Sebastian Inc. has forecasted a net income of $5,700,000 for this year. Its common stock currently trades at $19 per share, and the company currently has 830,000 shares of common stock outstanding. It...
MATCHING Place the letter from the list below in front of the correct item that matches....
MATCHING Place the letter from the list below in front of the correct item that matches. a. a company's distribution of its profits in the form of cash or stock to its shareholders b. date on which the board of directors announces the amount of the dividend, the record date and the payment date c. date on which the stock goes up, meaning it begins trading in the secondary market without dividend d. legal agreement a stockholder signs to allow...
True False O 0 1. Flotation costs serve to decrease the cost of preferred stock. O...
True False O 0 1. Flotation costs serve to decrease the cost of preferred stock. O 0 2. For a firm with debt, V > E. O 0 3. The cost of retained earnings is not affected by flotation costs. 0 0 4. It is not fair to assume that preferred stock’s par value will be repaid. 0 O 0 o 5. According to the subjective method, the company's current beta value should only be used for projects with average...
True or False: The following statement accurately describes how firms make decisions related to issuing new common stoc...
True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. O True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new...
Which of the following statements is CORRECT? If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price. An increase in the stock price when a company decreases its dividend is consistent with signaling theory. Firms with a large number of investment opportunities and a relatively small amount of cash tend to have above average dividend payout ratios. One advantage of the...
Question 5 (1 point) Saved "Growth" companies often payout a low percentage of their annual earnings in the form of dividends because, these companies tend to reinvest earnings generated by their operations into the their business to help finance their growth. Whereas "mature" companies that lack significant growth opportunities often distribute a high percentage of their net income as dividends. True False Part B Question 6 (1 point) On March 13th, The Company declares a $3.00 cash dividend. The Company...
Please answer all parts. thank you!
Low-regular-and-extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 25 %, its board realizes that strict adherence to that ratio would result in a fuctuating dividend and create uncertainty for the firm's stockholders. Therefore, the firm has declared a regular dividend of $0.60 per share per year with extra cash dividends to be paid when earnings justify them. Earnings per...
Low-regular and extra dividend policy Bennett Farm Equipment Sales, Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 30%, its board realizes that strict adherence to that ratio would result in a Puctuating dividend and create uncertainty for the firm's stockholders. Therefore, the firm has declared a regular dividend of $040 per share per year with extra cash dividends to be paid when earnings justify them. Eamnings per share for the last several...
9. Factors that influence dividend policy Аа Аа Distribution decisions are complicated and involve the understanding of critical strategic factors that affect the policy and value of a firm. Thus, the management of any firm has to consider the constraints on dividend payments, the availability and cost of alternative sources of capital, and other external factors when they create and implement their distribution policy. Consider the following restriction: Restrictions on dividend payments not to exceed the total amount of retained...
MATCHING Place the letter from the list below in front of the correct item that matches. a. a company's distribution of its profits in the form of cash or stock to its shareholders b. date on which the board of directors announces the amount of the dividend, the record date and the payment date c. date on which the stock goes up, meaning it begins trading in the secondary market without dividend d. legal agreement a stockholder signs to allow...
True False O 0 1. Flotation costs serve to decrease the cost of preferred stock. O 0 2. For a firm with debt, V > E. O 0 3. The cost of retained earnings is not affected by flotation costs. 0 0 4. It is not fair to assume that preferred stock’s par value will be repaid. 0 O 0 o 5. According to the subjective method, the company's current beta value should only be used for projects with average...
True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. O True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new...
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