CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
14th Edition
ISBN: 9780357292839
Author: MOYER
Publisher: CENGAGE L
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Chapter 15, Problem 9QTD
Summary Introduction

To discuss: The passive residual view of dividend policy be recounciled with the tendency of most firms to maintain a constant or steadily growing dividend payment record.

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How should (a) signaling and (b) the clienteleeffect be taken into account by a firm as it considers its dividend decision? Do signaling and clientele effects make it easier or harder to determineif investors prefer high or low payout ratios? Dothese factors influence the desirability of a stabledistribution policy versus one that is flexible andthus varies with the company’s cash flows andinvestment opportunities?
How does the market react to unexpected dividend changes? What does this tell us about dividendpolicy? How is it possible that dividends are so important, but at the same time, dividend policy isirrelevant?
Explain the Modigliani-Miller Payout Policy Irrelevance Proposition. What are the implications of Lintner’s model for firms’ dividend payout behaviour?
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