Assume you are the sole owner of a profitable, private U. S. corporation. What do you think would be the most tax- efficient method of receiving owner-ship income (via salary, perks, retained earnings, or dividends)?
Answer to relevant QuestionsWhy should we expect a firm’s stock price to decline by approximately the amount of the dividend payment on the ex-dividend date? Why do U. S. stock prices generally fall by less than the amount of the dividend payment? What does it mean to say that dividends are irrelevant in a world without taxes or other market frictions? Describe and evaluate the use of return on investment (ROI) and economic value added (EVA) as growth targets in financial planning. Why do firms often use annual growth in sales or assets as a target growth rate? What is the logic of the percentage-of-sales method for constructing pro forma statements? What general cost trade-offs must the financial managers consider when managing the firms operating assets? How do these costs behave as a firm considers reducing its accounts receivable by offering more restrictive credit ...
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