BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

Solutions

Chapter
Section
Chapter 15, Problem 1Q
Textbook Problem

Discuss the pros and cons of having the directors formally announce a firm’s future dividend policy.

Expert Solution
Summary Introduction

To Explain: Pros and cons of announcing the future dividend policy

Introduction:

Dividend Policy: It is the rules and regulations or protocol, which a company sets to share its earning with its shareholders. Dividend payment includes the payment to be made legally as well as financially.

Answer to Problem 1Q

There is various benefit of pre announcing the dividend policy but the most vital is that it minimizes the investor’s uncertainty.

Explanation of Solution

  • As the uncertainty decreases it results in lowering capital costs and the increase in stock prices resulted in benefitting the directors as well as the company.
  • Pre announcing dividend policy has some side effects too as it resulted in reducing the corporate flexibility.
Conclusion

As it has both negative and positive effect but it is better for the director’s to pre announce the dividend policy.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Get Solutions

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Get Solutions

Chapter 15 Solutions

Fundamentals of Financial Management (MindTap Course List)
Show all chapter solutions

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
Why should policymakers think about incentives?

Essentials of Economics (MindTap Course List)

To put the firms current P/E ratio in perspective, it is useful to compare this ratio with that of other compan...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What are real accounts? What are nominal accounts? Give examples of each.

College Accounting (Book Only): A Career Approach