CORPORATE FINANCE ACCESS CARD
12th Edition
ISBN: 2810023360184
Author: Ross
Publisher: MCG
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Textbook Question
Chapter 19, Problem 15CQ
Dividends and Income Preference The desire for current income is not a valid explanation of preference for high current dividend policy because investors can always create homemade dividends by selling a portion of their stocks. Is this statement true or false? Why?
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Students have asked these similar questions
Explain why dividends are not preferred for some investors
Why is there a cost for retained earnings?
Group of answer choices
Earnings can be reinvested or paid out as dividends
Investors could buy other securities, earn a return
Neither
Either
The residual theory of dividends argues that dividends
a. can only be distributed if there is income remained after funding all prospective investment
b. not relevant unless there is an excess demand for cash dividends
c. are irrelevant in any dividend distribution plan
d. are necessary and important to maintain the market price of any ordinary shares
Chapter 19 Solutions
CORPORATE FINANCE ACCESS CARD
Ch. 19 - Dividend Policy Irrelevance How is it possible...Ch. 19 - Stock Repurchases What is the impact of a stock...Ch. 19 - Dividend Policy It is sometimes suggested that...Ch. 19 - Dividend Chronology On Tuesday, December 8,...Ch. 19 - Prob. 5CQCh. 19 - Prob. 6CQCh. 19 - Dividends and Stock Price Last month, Central...Ch. 19 - Prob. 8CQCh. 19 - Dividend Policy For initial public offerings of...Ch. 19 - Investment and Dividends The Phew Charitable Trust...
Ch. 19 - Use the following information to answer the next...Ch. 19 - Stock Repurchases How do you think this tax law...Ch. 19 - Dividends and Stock Value The growing perpetuity...Ch. 19 - Bird-in-the-Hand Argument The bird-in-the-hand...Ch. 19 - Dividends and Income Preference The desire for...Ch. 19 - Dividends and Clientele Cap Henderson owns Neotech...Ch. 19 - Prob. 17CQCh. 19 - Prob. 18CQCh. 19 - Prob. 19CQCh. 19 - Prob. 20CQCh. 19 - Prob. 1MCCh. 19 - Jessica believes that the company should use the...Ch. 19 - Prob. 3MCCh. 19 - Another option discussed by Tom, Jessica, and...Ch. 19 - Prob. 5MCCh. 19 - Does the question of whether the company should...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- The bird-in-the-hand argument espousing the importance of dividends or dividend relevance suggests that investors view a current (certain) dividend as less risky than future (uncertain) dividends or capital gains; nevertheless, proponents of this theory argue that this will have no significant impact on share price. Is this true or falsearrow_forwardExplain the effect of D/E on asset returns, equity returns (assuming that cost of debt is not affected), asset beta and equity beta (assuming that debt beta is zero). Should an investor choose to invest in a stock of a company with high or low D/E, or why expected returns on these stocks are equivalent, although they are not equal?arrow_forwardIn examining investors’ preferences for dividends, it is useful to begin with the concept of dividend irrelevance. Dividend irrelevance suggests that in a world with no taxes or brokerage (or transaction) costs, firms and investors are indifferent to the paying or receiving of dividends. However, as these restrictions are relaxed, various factors suggest that firms should pursue high or low payouts. One such factor is: Dividends received far into the future are significantly more uncertain than dividends received in the near future. Based on the factor described, identify whether investors, in general, will tend to favor high or low payout ratios. Favor a high payout Favor a low payoutarrow_forward
- which one is correct please confirm? QUESTION 21 Finance researcher Myron Gordon argues that ____. a. the clientele effect has no influence on share value b. the existence of transaction costs has no impact on the dividend decision c. dividends reduce uncertainty, and thus the payment of dividends will increase the firm's value d. risk-averse shareholders may prefer some dividends over the promise of future capital gains if the interest rate is expected to declinearrow_forwardStrong form efficient market hypothesis states that stock prices reflects all the information in a market. The information may be public or private (i.e., insider information about the market) and such information will not benefit an investor in the form of higher returns.arrow_forward1. The P/E method of valuation is appropriate for Value investors. What does it mean if the P/E ratio is higher than the industry average? Should you buy the stock or not? 2. Why is EPS an inferior measure compared to cash flow? In what way is it a superior measure for stock investing compared to cash flow analysis?arrow_forward
- How does the equity method discourage the manipulation of net income by investors?arrow_forwardRegarding Efficient Market Hypothesis (EMH), which of the following statements is TRUE? Investors in the market are assumed to be rational and own private information. If the semi-strong form of EMH is true, all information contained in the history of past prices has been reflected by the current price. If the semi-strong form of EMH is true, you cannot beat the market by trading on private information. Post-earnings announcement drift is consistent with the semi-strong form of EMH.arrow_forwardThe efficient market hypothesis says that Multiple Choice market prices reflect underlying asset values. individual investors should not participate in the financial markets. investors should expect to earn abnormal profits. financial managers can accurately time stock and bond sales. creative accounting can be used to inflate stock prices.arrow_forward
- *which of the following statements is true? Select one: O Investors sell a stock when required return is less than expected return and buy a stock when required return above expected return O Investors sell a stock when it is under-valued and buy it when it is over-valued. O Investors buy a stock when it is under-valued and sell it when it is over-valued None of the answers are correctarrow_forwardIt is possible to ignore cash dividends that occur very far into the future when using a dividend discount model because those dividends: will most likely be paid to a different investor. will most likely not be paid. have an insignificant present value. have a minimal, if any, potential rate of growth.arrow_forwardThe dividend growth model of stock evaluation relies on several assumptions that might not be true in the real world. What are they?arrow_forward
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