The chairman of the board of Alphanull Corporation has announced that the corporation will change its dividend policy from paying a fixed dollar dividend per share Instead, dividends will be paid out as a residual That is, any cash flows left over after the firm has undertaken all profitable invest...

Theoretically the new dividend policy is irrelevant The important ...

The chairman of the board of Alphanull Corporation has announced that the corporation will change its dividend

Question:

The chairman of the board of Alphanull has announced that the will change its policy from paying a fixed dollar per share. Instead, dividends will be paid out as a residual. That is, any cash flows left over after the firm has undertaken all profitable investments will be paid out to shareholders. This new policy will obviously increase the variability of dividends paid. How do you think it will affect the value of the firm?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...