(1) What is meant by the term distribution policy? How has the mix of dividend payouts and...
Question:
(1) What is meant by the term “distribution policy”? How has the mix of dividend payouts and stock repurchases changed over time?
(2) The terms “irrelevance,” “dividend preference, or bird-in-the-hand,” and “tax effect” have been used to describe three major theories regarding the way dividend payouts affect a firm’s value. Explain what these terms mean, and briefly describe each theory.
(3) What do the three theories indicate regarding the actions management should take with respect to dividend payouts?
(4) What results have empirical studies of the dividend theories produced? How does all this affect what we can tell managers about dividend payouts?
Step by Step Answer:
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham