Problem

Comment briefly on each of the following statements:a. “Unlike American firms, which are a...

Comment briefly on each of the following statements:

a. “Unlike American firms, which are always being pressured by their shareholders to increase dividends, Japanese companies pay out a much smaller proportion of earnings and so enjoy a lower cost of capital.”


b. “Unlike new capital, which needs a stream of new dividends to service it, retained earnings have zero cost.”


c. “If a company repurchases stock instead of paying a dividend, the number of shares falls and earnings per share rise. Thus stock repurchase must always be preferred to paying dividends.”

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Solutions For Problems in Chapter 16