c. Now suppose the company unexpectedlyannounced: (1) an increase in its target dividendpayout ratio from, say, 25% to 75% and (2)an increase in the dividend from $1 to $3 toconform to the new policy. Would the new dividend policy help or hurt you and other holdersof the convertible bond? Explain.

c. Now suppose the company unexpectedlyannounced: (1) an increase in its target dividendpayout ratio from, say, 25% to 75% and (2)an increase in the dividend from $1 to $3 toconform to the new policy. Would the new dividend policy help or hurt you and other holdersof the convertible bond? Explain.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles

Section: Chapter Questions

Problem 7Q

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c. Now suppose the company unexpectedly
announced: (1) an increase in its target dividend
payout ratio from, say, 25% to 75% and (2)
an increase in the dividend from $1 to $3 to
conform to the new policy. Would the new dividend policy help or hurt you and other holders
of the convertible bond? Explain.

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