How do you determine the payout policy of a company with no dividends and negative earnings?...
How do you determine the payout policy of a company with no dividends and negative earnings?
Should or shouldn't an investor invest in these companies?
Homework Answers
Dividends are paid out of cash flows. So, even if earnings are negative cash flows can be positive and hence the company can pay dividends but if the cash flows are also negative, the company cannot pay dividends rather it needs funds.
An investor should not solely on the dividend policy determine whether to invest or not. Rather he should base his decision on the future cash flows.
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How do you determine the payout policy of a company with no
dividends and negative earnings?...
19 When firms earnings fluctuate, they tend to adjust their payout policy by O When firms...
19 When firms earnings fluctuate, they tend to adjust their payout policy by O When firms earnings fluctuate, they tend to adjust their payout policy by a stop paying dividends and repurchasing shares O allowing dividends to fluctuate while holding share repurchases relatively steady o allowing share repurchases to fluctuate while holding dividends relatively steady
The Wagner Company tries to follow a pure "residual" dividend policy. Earnings and dividends last year...
The Wagner Company tries to follow a pure "residual" dividend policy. Earnings and dividends last year were $100 million and $20 million respectively. Anticipated earnings for this year are $80 million. The company is financed completely with common equity. The required rate of return on retained earnings is 15 percent and the cost of new equity is 16 percent. If Wagner has $70 million of investment projects having expected returns greater than 15 percent, determine the total amount of dividends...
a) Suppose the company decided to payout 90% of its earnings as dividends, what would be...
a) Suppose the company decided to payout 90% of its earnings as
dividends, what would be the fundamental value of the stock today?
(t=0)
Set-up for all parts: Suppose that the rate of return on the market portfolio is 10% and the risk-free rate is 5%. Consider a stock with beta is 1.3. The firm is expected to have no earnings in the first year (E1 = 0), and then $10 earnings-per-share in the second year (E2 = 10). After...
Gordon's "bird-in-the-hand" argument suggests that dividends are irrelevant. firms should have a 100 percent payout policy....
Gordon's "bird-in-the-hand" argument suggests that dividends are irrelevant. firms should have a 100 percent payout policy. shareholders are generally risk averse and attach less risk to current dividends. the market value of the firm is unaffected by dividend policy.
how do regular dividends policies function in both perfect and imperfect capital markets? And how do...
how do regular dividends policies function in both perfect and imperfect capital markets? And how do companies select the best dividend policy for there company?
By simply looking at this display how would you describe the relationship between Earnings and Dividends?...
By simply looking at this display how would you describe the
relationship between Earnings and Dividends? Would you say that the
relationship is positive or negative, strong or weak? Do you
believe that a relationship will exist between these
variables?
Fitted Line Plot Earnings = 2.321 - 0.087 Dividends 5 S R-Sq R-Sq(adj) 1.46695 0.196 0.0% 4 Earnings 2 . 1 0 0.0 0.2 0.4 0.6 1.2 1.4 1.6 1.8 0.8 1.0 Dividends
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...
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 Question 9 (1 point) The following scenarios have the same impact on "Total Stockholders' Equity", but Scenario A...
How do you measure the cost of capital in a company with no dividends?
How do you measure the cost of capital in a company with no dividends?
A company has reported $4 per share in earnings, and maintains a 50% dividend payout ratio....
A company has reported $4 per share in earnings, and maintains a 50% dividend payout ratio. Its book value per share is $25. What is the expected growth rate in dividends? 4% 8% 12% 16%
19 When firms earnings fluctuate, they tend to adjust their payout policy by O When firms earnings fluctuate, they tend to adjust their payout policy by a stop paying dividends and repurchasing shares O allowing dividends to fluctuate while holding share repurchases relatively steady o allowing share repurchases to fluctuate while holding dividends relatively steady
a) Suppose the company decided to payout 90% of its earnings as
dividends, what would be the fundamental value of the stock today?
(t=0)
Set-up for all parts: Suppose that the rate of return on the market portfolio is 10% and the risk-free rate is 5%. Consider a stock with beta is 1.3. The firm is expected to have no earnings in the first year (E1 = 0), and then $10 earnings-per-share in the second year (E2 = 10). After...
By simply looking at this display how would you describe the
relationship between Earnings and Dividends? Would you say that the
relationship is positive or negative, strong or weak? Do you
believe that a relationship will exist between these
variables?
Fitted Line Plot Earnings = 2.321 - 0.087 Dividends 5 S R-Sq R-Sq(adj) 1.46695 0.196 0.0% 4 Earnings 2 . 1 0 0.0 0.2 0.4 0.6 1.2 1.4 1.6 1.8 0.8 1.0 Dividends
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...
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 Question 9 (1 point) The following scenarios have the same impact on "Total Stockholders' Equity", but Scenario A...
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