CORPORATE FINANCE (LL)-W/ACCESS
CORPORATE FINANCE (LL)-W/ACCESS
11th Edition
ISBN: 9781259976360
Author: Ross
Publisher: MCG
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Chapter 19, Problem 9CQ

Dividend Policy For initial public offerings of common stock, 2007 was a relatively slow year, with only about $35.6 billion raised by the process. Relatively few of the 159 firms involved paid cash dividends. Why do you think that most chose not to pay cash dividends?

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Home Depot, Inc.’s income statements for 2007, 2008, and 2009 show basic earnings per shareof $2.38, $1.34, and $1.58, respectively. Diluted earnings per share figures are slightly lower thanthese numbers, indicating the impact of potential capital stock activity that could reduce earningsper share for current stockholders.The company paid cash dividends of $0.90 per share in each of 2007, 2008, and 2009.a. Why do you think Home Depot is paying out only about 38 percent to 67 percent of its netincome to stockholders in the form of cash dividends?b. If you were an investor in Home Depot ’s stock, would you be unhappy because your dividendsrepresented such a small percentage of the company’s net income?
Felton Publishing recently completed its IPO. The stock was offered at $14.07 per share. On the first day of​ trading, the stock closed at $19.97 per share. a. What was the initial return on Felton​? b. Who benefited from this​ underpricing? Who​ lost, and​ why?
Corporate Finance In Reddit’s IPO, shares were issued at $34, and increased 48% that day, closing at $50.44.Would you expect founders to be upset at the underwriters given that they, personally, would havereceived more dollars if the underwriters had set the issuance price higher? Explain

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CORPORATE FINANCE (LL)-W/ACCESS

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Dividend explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Wy7R-Gqfb6c;License: Standard Youtube License