Busn 379 Course Project

The dividend policy has grown over the years. This may be so that the company projects itself as a less risky share and thus also gaining investors faith. The investors buy its shares and thus increase its demand. This helps to gives positive signals to the investors signalling that the company is stable and can generate earnings steadily. This hypothesis is gains standing from the dividend hypothesis theory.

The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.

When a company decides to pay dividends, it has to be careful on how much it will be given to the shareholders. It is of no use to pay shareholders dividends

The change in the growth assumption has significant impact on the stock price. Under the high estimate of growth rate 236%, the new price per share is $107.56. Under the low estimate of growth rate 35%, the new price per share is $2.36.

This reduction in equity value would be reflected as a $4.80/share decrease in share. In the twelve months post-dividend, net income would decrease by $45mm due to decreased interest income on the $1.5bn of cash. This reduction in net income would decrease EPS by $0.144/share.

The expected share price at the time of issue of the previous dividend on 22/03/2013 was 38.15 (This is incorrect). However, two months have passed since that date so we must consider growth of the expected share price during that period. We will use the estimated semi-annual growth rate to calculate this figure which we will denote PMay. This can be calculated by assuming that the dividend value grows at a constant rate in between issues. Since two months have passed, the estimated dividend one period from now will have grown approximately one third of the semi-annual growth rate. The

this large CAD/CAM equipment manufacturer must decide whether to pay out dividends to the firm¡¦s shareholders or repurchase stock. If

All else the same, which of the following is a possible consequence of the firm making a regular cash dividend payment?

Based on the financing needs, as above dividends would be additional stretch on company finances

Dividends are subjected to higher tax rate compare to capital gain increased due to share buy-back. This discourages shareholders from desire to receive high dividends in place of higher capital gain as share values increase. A comparison is made below between the proposed capital structure and dividend policy.

Dividend policy is at the theory core of corporate finance. It is one of the most debated topics in the finance literature and still keeps its prominent place. Many researchers have devised theories and provided empirical evidence regarding the determinants of a firm’s dividend policy. The dividend policy issue, however, is yet unresolved. Clear guidelines for an “optimal payout policy” have not yet emerged despite the voluminous literature. Yet we still do not have an acceptable explanation for the observed dividend behavior of companies. We are yet to understand completely the factors that drive dividend decision and the manner in which these factors interact. This is known as the dividend puzzle in the finance literature. Several hypotheses have been put forward to shed some light on this puzzle but in vain.

Dividend is that part of earning which is distributed among the shareholders. The decisions about when and how much earnings should be paid as dividends is part of the firm 's dividend policy. It is irrefutable that dividend policy is controversial issue as some people opine that dividends are relevant for the valuation of company and others think that dividend does not effect the market price of shares and valuation of firm. Besides this, the market where long term investment like share bonds are traded is capital market. In the following paragraphs, i will put my emphasis on both issues the dividend relevance theory along with roles and importance of capital market.

All of the firm’s decision regarding dividend policy depends on their stockholders preferences who appoint the Board of Directors and deciding that decision which is effective for both corporation as well as stockholder. Basically two types of investors are available in our industry; some prefer current return or other chose to maximize their wealth. Following figure differentiated this concept in detail: -

Dividend policy is a major financial decision that a company has to make in order for the shareholders to be rewarded for their investment in the business. It is one of the most predictable and stable element of a firm. Most firms commence dividend payment when the firm matures because at such a period, the firm receives fewer opportunities to invest into in order to raise their capital. It is, therefore, imperative for the management of the company to know predict

The first objection is related to the fact that this is a totally new approach concerning dividend policy, and nobody can predict what is going to happen. We consider that this may have positive effects on share prices, especially taking in consideration that it will stabilise the market price of the company.