Ans 1) Dividend irrelevance theory suggests that there is no effect of dividend on firm's value, it will be derived from firm's earning power and business risk.
Ans 2) Increase in stock price due to increase in dividend is explain by the signalling hypothesis.
Ans 3) Taxes on dividend income are paid in the year that they are received.
Ans 4) US tax code encourages many individual investors to prefer to recieve capital gains.
Ans 5) Investors with low tax rate will be pleased by increase in dividend income.
Ans 6) A firms past dividend policy determines its current clientele investors.
A firm's value depends on its expected free cash flow and its cost of capital. Distributions...
A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm’s value and the investors in different ways. Cloudy Skies Production Company’s CFO has stated that the firm will pay dividends only after all acceptable capital budgeting projects have been financed using retained earnings to the extent possible. Which concept did the CFO most likely base her decision on? The residual dividend model...
A firm's value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases Impact the firm's value and the investors in different ways. In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their financial needs. This circumstance is an illustration of: the residual dividend policy. the signaling hypothesis. dividend irrelevance theory. the clientele effect. Consider the...
12. Dividend policy A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm’s value and the investors in different ways. Some analysts have argued that a firm’s value should solely be determined by its basic earning power and the business risk of the firm. Which of these concepts would support these analysts’ argument? The signaling hypothesis The clientele effect Dividend irrelevance theory...
ch14:1 1. Dividend policy A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm’s value and the investors in different ways. Happy Whale Shipbuilders’ CFO has stated that the firm will pay dividends only after all acceptable capital budgeting projects have been financed using retained earnings to the extent possible. Which concept did the CFO most likely base her decision on? CHOOSE...
1. Dividend policy A firm’s value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm’s value and the investors in different ways. Some analysts have argued that a firm’s value should solely be determined by its basic earning power and the business risk of the firm. Which of these concepts would support these analysts’ argument? A. The signaling hypothesis B. Dividend irrelevance theory C....
5 The Board of Directors announces on August 17, 2020 a $1.20 dividend to be paid to shareholders of record on Wednesday, August 26th, to be received on September 15th. Sarah Grosaner plans to purchase the stock and recieve the dividend. What is the last date Sarah can purchase the stock, and recieve the dividend a Wednesday August 26 b. Thursday August 27 c. Friday August 28 d. Monday August 31 e. none of the above 6 Theory that investors...
Which of the following statements is true? Taxes on dividend income are paid when the stock is sold. Taxes on dividend income are paid in the year that they are received As a result, the U.S. tax code encourages many individual investors to prefer to receive Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. The theory of explains this phenomenon In some cases, analysts notice that...
Yellowstone recently announced that it will cut its cash dividend this quarter by 50%. You think this is a bad idea because the firm has enough cash and on hand and will recover from the temporary challenges in the following quarter. You base your assessment on the fact that the market reacts to changes in the firm's dividend policy. This market response is best explained by the Multiple Choice ex-dividend effect information effect. O trade off theory of dividends. clientele...
Question 3 Explain the concept of dividend policy with an example. Discuss the dividend irrelevance theory with underlying assumptions by Modigliani and Miller. Your parents prefer high dividend paying stocks, while you prefer no-dividend stocks – explain the possible reasons for the differences in choice. Explain the following concepts with an example; Signaling hypothesis Clientele effects Catering theory You are the CEO of “I am the top 1%” Corporation, which has a capital structure of 60% equity and 40% debt....
Use the corporate, or free cash flow, model to estimate Petry Corporation's intrinsic value. The firm's WACC is 10.00%, its end-of-year free cash flow (FCF1) is expected to be $65.0 million, the FCFs are expected to grow at a constant rate of 5.00% a year in the future, the company has $200 million of long-term debt and preferred stock, and it has 25 million shares of common stock outstanding. Assume the firm has zero non-operating assets. What is the firm's...