(c) One reason for paying dividend is the “clientele effect". Explain how this affects the decision to pay dividend?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach

Section: Chapter Questions

Problem 8QE

See similar textbooks

Related questions

Q: "If management wishes to capitalize part of the earnings, it may issue a" share dividend.…

A: Dividend are the share or part of profits that is being distributed or divided to the shareholders…

Q: How does the market react to unexpected dividend changes? What does this tell us about dividend…

A: Dividend: It refers to the surplus amount paid by the company to its shareholders. It is considered…

Q: What are the different types of dividends, and how is a dividend paid?

A: A portion of profits payable to the shareholders by the company on a regular period is termed as…

Q: Which are more critical to the dividend decision, earnings or cash flow? Explain.

A: The dividend is the amount paid to the equity shareholders in return to the amount of investment in…

Q: Is Share Dividends qualify as Revenue?

A: If the entity is in the business of buying and selling shares and securities then share dividends…

Q: Which does not affect total shareholders’ equity? a. Stock dividend b. Scrip dividend c. Cash…

A: The dividend is paid to the shareholders from the retained earnings of the business.

Q: Which does not affect total stockholders' equity? Property dividend Cash dividend…

Q: key factors involved in establishing a dividend policy

A: A dividend policy is the dividend distribution criteria established by a company's board of…

Q: a) Where did the profit go? b) What do you mean by dividend? Explain c) How was it possible to…

A: Statement of cash flows: It is one of the financial statement that shows the cash and cash…

Q: id-in-capital and retained earnings: Similar? Different? What are the main categories of paid-in…

A: It is usually split into two different line items: common stock (par value) and additional paid-in…

Q: Write a note on dividend. To who is dividend is paid?

A: Dividends are paid to the shareholders of the company.

Q: Which dividends do not reduce stockholders' equity? O Cash dividends O Stock dividends O Property…

A: When Cash Dividends are Paid than they Reduces Retained Earning and Cash Balance of the Organization…

Q: Dividend policy determines the ratio between the earnings distributed to shareholders and the…

A: Dividend policy is referred as the dividend distribution, which has the guidelines that actually…

Q: fine dividend policy. Why do investors want dividends? Explain the different types of dividend

A: Define dividend policy In simple words, A dividend policy can be understood as the framework by…

Q: Write Example for equity dividend?

A: Answer: Equity dividend is the dividend that is paid to equity shareholders.

Q: What is the difference between a cash dividend and a stock dividend?

A: Cash dividends are the amount of cash distributed to stockholders by a company out of its earnings,…

Q: Why is the ex-dividend date important to stockholders? If a stock is sold on the ex–dividend date,…

A: The ex-dividend date is important to stockholders as it is the date on/after which a new buyer of…

Q: Profit Maximization is also called as: a. Earning per share maximization b. Dividend per share…

A: Profit maximization: Profit Maximization is the main goal of any firm. Profit maximization is…

Q: Which of the following will result when a dividend is paid? A debit to dividends payable. A credit…

A: Concept used : When dividend is paid then journal entry will be to debit the dividend payable and…

Q: What is the ex-dividend date, and why is it important to investors?

A: One business day before the record date of a stock is referred as ex-dividend date. Whenever a…

Q: Dividends representing a return of invested capital is known as a. stock dividend b. scrip dividend…

A: Dividends are paid to the investors by the company out of profit of the company. They are paid to…

Q: oes cost

A: Cost of capital : The required return on capital, especially as the expense of developing a new…

Q: 1. Why is there a cost associated with retained earnings? 2. What is Coleman's estimated cost of…

A: Given: The firm tax rate is 25% The current price of coleman’s is 12% The current price of firm is…

Q: Topic: Payout Policy What are the drawback(s) of distributing dividends instead of retained…

A: The dividend policy is a decision in deciding the exchange between paying dividends and retaining…

Q: Why is the ex-dividend date important to investors?

A: One business day before the record date of a stock is referred as ex-dividend date. Whenever a…

Q: To identify the cost of equity, which models are better: The dividend growth model or CAPM-derived…

A: The question is based on the comparative study of the methods to derive cost of equity. Cost of…

Q: Describe how preferred dividends affect the calculation of EPS.

A: Preference shares: A preference share is one which carries following preferential rights over other…

Q: estion below. ) Which of the following is not a method to pay dividend to shareholders? Options O…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Topic: Payout Policy What is the advantage(s) of dividends against retained earnings?

A: Dividend is the share which is given to the shareholders when from the company's profit. Dividend…

Q: b) What do you mean by dividend? Explain c) How was it possible to distribute dividends in the…

A: Shareholders of a company expects return on investment made by them . companies pay a portion of…

Q: What is the Dividend Discount Model? What are some of the limitations of the Dividend Discount Model

A: There are several method on the basis of which the estimated required rate of return can be…

Q: One of the reasons why firms pay dividends is that dividends payments can be a signal to the…

A: Dividend payments can be an indication that the firm is going to do well in the future. Firms that…

Q: Compare Dividend Valuation Model with Capital Asset Pricing Model in the context of calculating cost…

A: The dividend discount model and the capital asset pricing model are two methods for estimating cost…

Q: TRUE OR FALSE? The total retained earnings can be declared as dividends.

A: Retained earnings: Retained earnings are those profits that the company has been accumulated over…

Q: Explain the procedures used to actually pay the dividend.

A: Step 1 A dividend is the distribution of the dividend or residual profits to the shareholders on a…

Q: In the application of the equity method, how should dividends from the investee be accounted for?…

A: Equity method: Equity method is the accounting method used for accounting equity investments which…

Q: The distribution of a dividend that represents a partial return of the original investment made by…

A: Dividends can be paid in a number of different forms, including cash, stocks, and other assets. A…

Q: Why the dividend does exceeds the balance in retained earnings, the excess referred to as a…

Q: O c.Dividend Decision

A: In simple words, whenever a company makes any profit, it has two choices either to distribute them…

Q: Which is better, a stock dividend or a cash dividend?

A: Stock dividends refer to paying additional units of shares instead of cash. Stock dividends are paid…

Q: You maximize shareholder's wealth by seeking to maximized Earnings Per Share which is based on…

A: Shares holders are TRUE owners of company and maximization of wealth of shareholders is objectives…

Question

(c) One reason for paying dividend is the “clientele effect". Explain how this affects the decision
to pay dividend?
ee

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Explain the theory behind the dividends-based valuation approach. Why are dividends value-relevant to common equity shareholders?
What do the three theories indicate regardingthe actions management should take withrespect to dividend payouts?
a) Where did the profit go? b) What do you mean by dividend? Explain c) How was it possible to distribute dividends in the presence of a loss?
Explain how dividend policy affects the need for external financing.
The terms “irrelevance,” “dividend preference”(or “bird-in-the-hand”), and “tax effect” havebeen used to describe three major theoriesregarding the way dividend payouts affect afirm’s value. Explain these terms, and brieflydescribe each theory.
what is a dividend aristrocrat? in Finance
What factors fo firms consider in establishing dividend policy? Briefly describe each of them
Define dividend policy. Why do investors want dividends? Explain the different types of dividends.
A high dividend payment could decrease share price, increase it or make no difference. Explain, in detail, these three basic views on dividend policy.