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a. How would a firm′s decision to pay out a higher percentage of its earnings as dividends affect each of the following? 1. The value of its long-term warrants 2. The likelihood that its convertible bonds will be converted 3. The likelihood that its warrants will be exercised b. If you owned the warrants or convertibles of a company, would you be pleased or displeased if it raised its payout rate from 20% to 80%? Why?

BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

Solutions

Chapter
Section
Chapter 20, Problem 10Q
Textbook Problem

a. How would a firm′s decision to pay out a higher percentage of its earnings as dividends affect each of the following?

  1. 1. The value of its long-term warrants
  2. 2. The likelihood that its convertible bonds will be converted
  3. 3. The likelihood that its warrants will be exercised

b. If you owned the warrants or convertibles of a company, would you be pleased or displeased if it raised its payout rate from 20% to 80%? Why?

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