Question: Question 5 QUESTION 5 (10 marks) a) You are examining the historical dividend policy of a large 'blue-chip' biotech company, Tech-Tok Ltd. The following chart

Question 5

QUESTION 5 (10 marks) a) You are examining the historical dividend policy of a large 'blue-chip' biotech company, Tech-Tok Ltd. The following chart shows the company's EPS and DPS from 2014 to 2018. $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 S- 2014 2015 2016 2017 2018 -0-EPS $1.60 $4.20 $4.80 3.6 2 -0-DPS SO.80 $2.10 $2.40 $1.80 $1.00 --EPS -O-DPS What dividend policy does the above chart suggest Tech-Tok has adopted in the past? (4 marks) b) A successful small-cap growth company, TechMax Lid, also operates in the biotech industry. It has been generating regular earnings over the same period as Tech-Tok Lid, but never pays any cash dividends. Explain this practise of not paying cash dividends based on: () The clientele effect (3 marks) (ii) Dividend signalling theory

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