Dividends Essays Video
Cash Flow Statement (Financing Activity, Cash Dividends Declared \u0026 Paid, 2-Step Process, Chg Cash) Dividends EssaysDividends Essays - question
In this paper we perform the analysis of each of the stated proposals and give recommendation on the most appropriate option for Echo Co. There are several dividend theories in corporate finance which have different approach to benefits and disadvantages of dividends. According to the studies of Gordon and Lintner , equity investors tend to value dividends more than capital gains. They also argue that higher dividends increase stock value of the company and make it more attractive to the equity investors. On the other hand, tax-preference theory of Litzenberger and Ramaswamy , suggests that investors are more likely to invest in companies with low dividends for tax reasons. Their main argument is that dividends are taxed at a higher rate than capital gains, therefore, making a high-dividend companies a less attractive investment. Finally, theory of Miller and Modigliani suggests that dividend policy of a company is totally irrelevant and has no influence on the value of a firm.
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Stock Valuation Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to Dividends Essays shareholders. If the required return on this stock is 12 percent, what is the current share price? Dividsnds
What is your value for the current share price now? Hint: Find the equivalent annual end-of-year dividend for each year. Comment on whether you think this model of stock valuation is appropriate.]
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