Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 17, Problem 7CRCT
Summary Introduction
To discuss: D company’s direct reinvestment plan.
Introduction:
Direct reinvestment plan is a plan, where the investors can reinvest their shares in order to acquire supplementary shares. Under this plan, the investors are not permissible to receive any dividend, as the plan is meant for only making additional shares.
Summary Introduction
To discuss: Progress in shareholders wealth.
Summary Introduction
To discuss: Advantages and disadvantages of D company’s DRIP.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assuming yourself to be Anna, narrate what you would have read in the file. Your narrative should include answers to the following:
Note: 1 Retention ratio = 1 – Dividend payout ratio
d) If Chatterbox Inc. switches to the new dividend policy, what would be the DPS for the next period?
Shares repurchase and the previous problem? Suppose the company had. Announce is going to repurchase $21,850 worth of stock instead of repairing a dividend. What effects would the transaction have on the equity of the firm? How many shares will be outstanding? What will the price per share before the repurchase? Ignoring tax effects, shows how the share repurchase is affectively the same as a cash dividend.
What was the primary motivation for Apple (and others) to undertake a stock split?
To raise more cash for the company through increasing the number of shares on the market
To make the price of their shares seem more affordable to investors
To decrease their number of share outstanding in order to increase EPS
O To raise more cash for the company through a stock issuance
Question 11
What could be a major motivation for Walmart (and others) to undertake a share repurchase?
O To purchase cheaper shares today and reissue later at a higher price
To make their shares seem more affordable to investors
Because they have no other options to use their cash
O To get additional cash today in order to invest in other projects
Chapter 17 Solutions
Fundamentals of Corporate Finance
Ch. 17.1 - Prob. 17.1ACQCh. 17.1 - What are the mechanics of the cash dividend...Ch. 17.1 - How should the price of a stock change when it...Ch. 17.2 - How can an investor create a homemade dividend?Ch. 17.2 - Prob. 17.2BCQCh. 17.3 - Prob. 17.3ACQCh. 17.3 - Why do flotation costs favor a low payout?Ch. 17.4 - Why might some individual investors favor a high...Ch. 17.4 - Prob. 17.4BCQCh. 17.5 - How does the market react to unexpected dividend...
Ch. 17.5 - Prob. 17.5BCQCh. 17.6 - Prob. 17.6ACQCh. 17.6 - Prob. 17.6BCQCh. 17.8 - Prob. 17.8ACQCh. 17.8 - How does the accounting treatment of a stock split...Ch. 17 - Dividends are paid to the parties listed as...Ch. 17 - Prob. 17.3CTFCh. 17 - Prob. 17.4CTFCh. 17 - Prob. 17.8CTFCh. 17 - Dividend Policy Irrelevance [LO2] How is it...Ch. 17 - Prob. 2CRCTCh. 17 - Prob. 3CRCTCh. 17 - Prob. 4CRCTCh. 17 - Prob. 5CRCTCh. 17 - Prob. 6CRCTCh. 17 - Prob. 7CRCTCh. 17 - Prob. 8CRCTCh. 17 - Prob. 9CRCTCh. 17 - Prob. 10CRCTCh. 17 - Prob. 1QPCh. 17 - Prob. 2QPCh. 17 - Prob. 3QPCh. 17 - Prob. 4QPCh. 17 - Regular Dividends [LO1] The balance sheet for...Ch. 17 - Prob. 6QPCh. 17 - Prob. 7QPCh. 17 - Stock Dividends [LO3] The company with the common...Ch. 17 - Stock Splits [LO3] In the previous problem,...Ch. 17 - Homemade Dividends [LO2] You own 1,000 shares of...Ch. 17 - Prob. 11QPCh. 17 - Stock Repurchase [LO4] Galles Corporation is...Ch. 17 - Expected Return, Dividends, and Taxes [LO2] The...Ch. 17 - Dividends and Taxes [LO2] As discussed in the...Ch. 17 - Prob. 15QPCh. 17 - Dividends versus Reinvestment [LO2] After...Ch. 17 - Prob. 1MCh. 17 - Prob. 2MCh. 17 - Prob. 3MCh. 17 - Prob. 4MCh. 17 - Prob. 5MCh. 17 - Prob. 6M
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Question 4 The president of Phoenix wonders what accounts for Denver’s current (2010) higher stock price, although Phoenix currently earns more per share than Denver and frequently has paid a higher dividend. a) What factors can you observe that might help to explain this phenomenon? b) Explain every possible dividend policies you know and suggest the one you think is the best dividend policy for both Phoenix and Denver that might lead to increases in both of their share prices. What are the limitations of your suggestions? c) What are the reasons for investors to like dividend pay outs while some dislike dividend payouts?arrow_forward6. IPO price stabilization Which of the following strategies can underwriters use to prevent institutional investors from flipping? Check all that apply. They can require an overallotment clause in the underwriting agreement of the IPO. They can agree to make more shares of future IPOS available to investors that hold on to the initial shares for a relatively long period of time. They can require a lockup clause in the underwriting agreement of the IPO. They can agree to sell the shares in the IPO at a lower price than suggested by their bookbuilding analysis.arrow_forwardThe Hughes Corporation is considering ways to raise additional equity capital. Which one of the following items will allow that to happen, holding all else constant? O The company should consider using a "new stock" dividend reinvestment plan. O The company should declare a 1-for-2 reverse stock split. O The company should offer an "old stock" dividend reinvestment plan. O The company should consider a stock repurchase program.arrow_forward
- True or False: Private equity investors can easily sell or exchange their investments for cash anytime? True or False: Private equity firms only invest in small companies? True or False: Everything else stays the same. If a company's gross debt amount increases, its equity value decreases?arrow_forwardIn the United State, we can see that there is a trend in stock repurchase even the repurchase payer firms exceed the dividend payer firms. With this increasing trend: (i) Discuss three (3) reasons why some firms still paying a cash dividend(ii) Discuss three types of stock repurchasearrow_forwardYour company has been very profitable and expects continued financial success. Its stock price has reached a pointwhere the company needs to make it more affordable. Wouldyou recommend a stock dividend or a stock split? Why?arrow_forward
- A4) 26.Automatic dividend reinvestment plans allow firms to: Select one: a. pay dividends on a more frequent schedule. b. increase their dividend to attract more investors. c. avoid the ex-dividend date. d. reduce their cash outflow to shareholders. e. transform regular dividends to extra dividends.arrow_forwardDividend policy and company value: You have just encountered two identical companies with identical investment opportunities, as well as the ability to fund these opportunities. You have found that one of the companies has just announced an introductory dividend policy, whereas the other has continued with a no-dividend policy. Which of the two companies is worth more? Explainarrow_forwardQ2. In Q1, suppose the company gives up the cash dividend plan because of shareholder opposition.Instead, the company decides to buyback $22,800 worth of stock. a) How many shares will be repurchased? b) What will the price per share be after the repurchase according to MM model?arrow_forward
- [multiple choice questions] INDO Inc. always pays all of its earnings as dividends, and therefore has no retained earnings. The same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity. The targeted capital structure consists of: common stock, preferred stock, and debt. Which of the following events will reduce WACC? a. The market risk premium is decreasing. b. Flotation costs associated with issuing new common stock increase. c. The company's beta is increasing. d. Inflation is expected to increase. e. The flotation costs associated with issuing preferred stock increase.arrow_forwardInvestors are more concerned with future dividends than historical dividends, so go to ESTIMATES and scroll down to the Consensus Estimates on the screen. Click on the Available Measures menu to toggle between earnings per share and dividends per share. How do analysts expect Apple's payout policy to behave in the future?arrow_forwardShould stockholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action increases a firm’s stock price from a current level of $20 to $25 in 6 months and then to $30 in 5 years but another action keeps the stock at $20 for several years but then increases it to $40 in 5 years, which action would be better? Think of some specific corporate actions that have these general tendencies.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Dividend explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Wy7R-Gqfb6c;License: Standard Youtube License