Question: a. How would a firms decision to pay out a higher percentage of its earnings as dividends affect each of the following? (1) The value

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?

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a 1 The value of a warrant depends primarily on the expected growth of the underlying stocks price T... View full answer

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