Despite enjoying the success of iMac and iPhone, Apple Inc. has not been paying out dividends...

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Despite enjoying the success of iMac and iPhone, Apple Inc. has not been paying out dividends for several years. The latest figures show that Apple Inc.'s net income to common shares is increasing: Net income applicable to common shares 2007 $3,496,000,000 2008 2009 $4,834,000,000 $5,704,000,000 Required: a. What are the pros and cons of paying dividends? b. Explain clearly, using appropriate financial theories when applicable, how companies determine their dividend policy. Explain why companies such as Apple Inc. might decide not to pay dividends. 2. 3. Explain, with the aid of a diagram, how a firm's dividend policy is independent from its investment policy in a perfect and complete world. You should include discussion of both Modigliani and Miller's argument on dividend and Fisher's separation theorem in your answer. Critically discuss how a change of dividend policy may affect a company's equity price. 4. Using arguments based on the Signalling Theory and tax clientele effect of dividends, to what extent would you conclude that dividend policy is irrelevant to corporate value? Despite enjoying the success of iMac and iPhone, Apple Inc. has not been paying out dividends for several years. The latest figures show that Apple Inc.'s net income to common shares is increasing: Net income applicable to common shares 2007 $3,496,000,000 2008 2009 $4,834,000,000 $5,704,000,000 Required: a. What are the pros and cons of paying dividends? b. Explain clearly, using appropriate financial theories when applicable, how companies determine their dividend policy. Explain why companies such as Apple Inc. might decide not to pay dividends. 2. 3. Explain, with the aid of a diagram, how a firm's dividend policy is independent from its investment policy in a perfect and complete world. You should include discussion of both Modigliani and Miller's argument on dividend and Fisher's separation theorem in your answer. Critically discuss how a change of dividend policy may affect a company's equity price. 4. Using arguments based on the Signalling Theory and tax clientele effect of dividends, to what extent would you conclude that dividend policy is irrelevant to corporate value?

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A What are the pros and cons of paying dividends Pros Paying dividends can be a way to reward shareholders for their investment in the company Dividends can be used as a sign of financial stability an... View the full answer