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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Students have asked these similar questions
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?
Chapter 15 Solutions
CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
Ch. 15 - Prob. 1QTDCh. 15 - Prob. 2QTDCh. 15 - Prob. 3QTDCh. 15 - Prob. 4QTDCh. 15 - Prob. 5QTDCh. 15 - Prob. 6QTDCh. 15 - Prob. 7QTDCh. 15 - Prob. 8QTDCh. 15 - Prob. 9QTDCh. 15 - Prob. 10QTD
Ch. 15 - Prob. 11QTDCh. 15 - Prob. 12QTDCh. 15 - Prob. 13QTDCh. 15 - Prob. 14QTDCh. 15 - Prob. 15QTDCh. 15 - Prob. 16QTDCh. 15 - Prob. 17QTDCh. 15 - Prob. 18QTDCh. 15 - Prob. 1PCh. 15 - Prob. 2PCh. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - Prob. 5PCh. 15 - Prob. 6PCh. 15 - Prob. 7PCh. 15 - Prob. 8PCh. 15 - Prob. 9PCh. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 12PCh. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Prob. 15P
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- thank you, what if instead of company is anticipating increasing its dividend it anticipated a decrease ?arrow_forwardTo what extent does the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate claims.arrow_forwardIs this statement true or false? Give a reason for your answer. " Relevant or not, frequent changes in dividend policy can harm a firm."arrow_forward
- Practice : a: The computation of return on average investment ignores one characteristic of the earnings stream, which is considered in discounting cash flows. What is this characteristic? Why is it important? b: What are the disadvantages of evaluating an investment using payback period? Why might a company use this methodology despite these disadvantages?arrow_forwardWhich of the following statements is correct? A. The optimal dividend policy is the one that satisfies management, not shareholders. B. The use of debt financing has no effect on earnings per share (EPS) or stock price. C. Stock price is dependent on the projected EPS and the use of debt, but not on the timing of the earnings stream. D. The riskiness of projected EPS can impact the firm's value. E. Dlvidend policy is one aspect of the firm's financial policy that is determined solely by the shareholders. Reset Selectionarrow_forwardIf the company follows a residual dividend policy, what will be its payout ratio?arrow_forward
- Is a company's dividend policy payment important? Please explain why or why notarrow_forwardDividend Policy. How is it possible that dividends are so important, but at the same time, dividend policy is irrelevant? If increases in dividends tend to be followed by (immediate) increases in share prices, how can it be said that dividend policy is irrelevant?arrow_forwardIt has been shown that in the absence of taxes and other market imperfections, the firm value will be unaffected by dividend policy. Explain the logic behind this conclusion. Next, describe three real-world factors that may cause one dividend policy to be preferable to another.arrow_forward
- If markets are truly efficient, does it matter whether firms engage in earnings management? On the other hand, if firms manage earnings, what does that say about management’s view on efficient markets?arrow_forwardThe idea that changes in dividend policy reflects managers' views about the firm's future earnings is known as: a) Modigliani and Miller Theory b) Payoff Theory c) Dividend Signaling Hypothesis d) Pecking Order Hypothesisarrow_forwardIn your opinion, what is the main problem with the dividend valuation models as compared to the free cash flow valuation model?arrow_forward
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