The Phew Charitable Trust pays no taxes on its capital gains or on its dividend income or interest income. Would it be irrational for it to have low-dividend, high-growth stocks in its portfolio? Would it be irrational for it to have municipal bonds in its portfolio? Explain.
Answer to relevant QuestionsThe growing perpetuity model expresses the value of a share of stock as the present value of the expected dividends from that stock. How can you conclude that dividend policy is irrelevant when this model is valid?In spite of the theoretical argument that dividend policy should be irrelevant, the fact remains that many investors like high dividends. If this preference exists, a firm can boost its share price by increasing its dividend ...The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a stock dividend of 25 percent. The stock goes ex-dividend tomorrow (the chronology for a stock dividend is similar to that for a ...Electronic Timing, Inc. (ETI), is a small company founded 15 years ago by electronics engineers Tom Miller and Jessica Kerr. ETI manufactures integrated circuits to capitalize on the complex mixed-signal design technology ...Raggio, Inc., has 135,000 shares of stock outstanding. Each share is worth $75, so the company’s market value of equity is $10,125,000. Suppose the firm issues 30,000 new shares at the following prices: $75, $70, and $65. ...
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