In the absence of market imperfections and taxes, stock repurchases are same as cash dividends. How does this change in real world circumstances and what effect does a stock repurchase announcement have on stock price?
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Question 5
In the absence of market imperfections and taxes, stock repurchases are same
as cash dividends. How does this change in real world circumstances and what
effect does a stock repurchase announcement have on stock price?
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- Question 5 The issue as to whether dividend policy has an effect on share prices raises a question as to whether dividends paid out to stockholders are any more “certain” than the expected future dividends the stockholders hope to receive from retention of firm earnings. This is known as the bird-in-the-hand theory of dividend policy. Do you agree with this theory? Explain.In the absence of market imperfections and taxes, stock repurchases are sameas cash dividends. How does this change in real world circumstances and whateffect does a stock repurchase announcement have on stock price?1. Is stock bonus a real dividend payment in principle? 2. Briefly describe the information signaling effect caused by dividend reduction announcement (in terms of assumption and market reaction)
- 1.1 Why are stocks called "equities"? Are bonds also equities? 1.2 In what ways are dividends similar to coupons on bonds? In what ways are dividends different from coupons on bonds? 1.4 How do fluctuations in stock prices affect the economy? Use your own words and no plagiarism make it short and simple answer pleaseQuestion 4:(a) What are the principal differences between common stock and preferred stock?(b) Preferred stock may be cumulative. Discuss this feature.(c) How are dividends in arrears presented in the financial statements?Case Study #3: Chapter 6 Business Analysis - A business can be valued by capitalizing its earnings stream (see example 6.15). How might you use the same idea to value securities, especially the stock of large publicly held companies? Is there a way to calculate a value that could be compared to the stock’s market price that would tell an investor whether it’s a good buy? (If the market price is lower than the calculated value, the stock is a bargain.) What financial figures associated with shares of stock might be used in the calculation. Consider the per share figures and ratios discussed in chapter 3 including EPS, dividends, book value per share, etc. Does one measure make more sense than the others? What factors would make a stock worth more or less than your calculated value?
- What effect will the acquisition of treasury stock have on a company's earnings per share? (NIE 12) There is not enough information provided to answer this question Decrease No effect IncreaseCH6 # 1 The ABC Company has a stable dividend policy ($2 per share per year). It also has a policy of not raising new capital from the market. The policy is to invest the available funds after payment of the dividends (excess cash is invested in marketable securities). What does this imply about the use of the present value method of making investment decisions?1. What are the company motives for declaring dividends or stock repurchase programs? 2. How would you argue for a significant increase in both dividends and repurchases instead of using the available cash to make investments, i.e. M&A? 3. Would the tax treatment of dividend income versus capital gains income affect the managers’ decisions to disburse cash via dividends versus stock repurchases?
- QUESTION 10 Diluted earnings per share shows dilution resulting from additional shares that may be issued for stock options or bonds that may be converted to shares of common stock in the future. True False1. How do you think today's low interest rate environment is impacting the time value of money? How might this change the value of an asset or liability? 2. What is the relationship between the concepts of net present value and shareholder wealth maximization? 3. Offer some reasons that the intrinsic value that you might calculate with the methodologies learned might yield a price different than what the stock trades at in the stock market. You can reference any method of valuation models in offering thoughts on why there might be differences between intrinsic and market values.Explain why the following statement is wrong (1 paragraph maximum): "The main reason why some companies prefer to return cash to shareholders through stock repurchases, rather than dividends, is because repurchases reduce the number of share outstanding and thus tend to increase the stock price."