BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section
BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay cash dividends during the same year. Discuss the meaning of those statement.

Summary Introduction

To explain: Whether it is totally irrational for a firm to sell a new issue stock and to pay cash dividends during a year.

Introduction:

Retained Earnings: A company has kept a certain amount of its net earnings to reinvest into the business or to pay its debt instead of paying it as a dividend is known as the retained earnings. It is recorded under the shareholder’s equity in balance sheet.

Explanation
  • Selling stock and paying dividends at the same time is not necessarily irrational for the firm as it may decrease it’s goodwill in the market...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

If a firms ROE is low and management wants to improve it, explain how using more debt might help.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

What factors affect a persons choice of careers?

Foundations of Business (MindTap Course List)

Why should policymakers think about incentives?

Brief Principles of Macroeconomics (MindTap Course List)

PRO FORMA INCOME STATEMENT Austin Grocers recently reported the following 2014 income statement (in millions of...

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