On your visit to Alessandra Chemical Corp. (ACC), you learned that the board of directors has periodically debated the company's dividend-payout policy.
a. Briefly discuss two arguments for and two arguments against a high dividend payout policy A director of ACC said that the use of dividend discount models by investors is "proof that "the higher the dividend, the higher the stock price."
b. Using a constant-growth dividend discount model as a basis of reference, evaluate the director's statement.
c. Explain how an increase in dividend payout would affect each of the following (holding all other factors constant):
(1) Internal (implied, normalized, or sustainable) growth rate
(2) Growth in book value

  • CreatedDecember 17, 2014
  • Files Included
Post your question