Comment briefly on each of the following statements: (a) Unlike American firms, which are always being pressured
Question:
Comment briefly on each of the following statements:
(a) Unlike American firms, which are always being pressured by their shareholders to increase dividends, Japanese companies pay out a much smaller proportion of earnings and so enjoy a lower cost of capital.”
(b) “Unlike new capital, which needs a stream of new dividends to service it, retained earnings have zero cost.”
(c) “If a company repurchases stock instead of paying a dividend, the number of shares falls and earnings per share rise. Thus stock repurchase must always be preferred to paying dividends.”
Step by Step Answer:
a This statement implicitly equates the cost of equity capital with the stocks divi...View the full answer
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
Students also viewed these Corporate Finance questions
-
Comment upon each of the following statements you heard in a conversation between two newly- hired staff auditors. a.Of course, Im qualified to be assigned to this engagement. I have an accounting...
-
Each of the following statements is true under most circumstances, but not always. In each case, indicate when the statement will not be true and why.
-
Briefly describe each of the following motives for merging: (a) Growth or diversification, (b) Synergy, (c) Fund raising, (d) Increased managerial skill or technology, (e) Tax considerations, (f)...
-
According to Thomson Financial, last year the majority of companies reporting profits had beaten estimates. A sample of 162 companies showed that 114 beat estimates, 29 matched estimates, and 19 fell...
-
Does light travel faster through the lower atmosphere or through the upper atmosphere?
-
Search the Internet for ISO 27001. Explain the purpose of this standard.
-
Microfinance has grown most quickly in low-income countries, but many poorer households in richer countries also lack access to highquality financial services at reasonable prices. Why would...
-
Relating market value to book value of shareholders' equity Firms prepare their balance sheets using authoritative guidance for the recognition and measurement of assets and liabilities. Accountants...
-
In 2021, BLK Co. sells materials for $117,000 to CompValue Inc. BLK also purchases computers from CompValue for $13,400. The fair value of these computers is $9,700. In 2021, BLK recognizes revenue:...
-
On May 1, Soriano Co. reported the following account balances along with their estimated fair values: On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which...
-
It is well documented that stock prices tend to rise when firms announce increases in their dividend payouts. How, then, can it be said that dividend policy is irrelevant?
-
Suppose the MillerModigliani (MM) theory of dividend policy is correct. How would a government-imposed dividend freeze affect (a) Stock prices? (b) Capital investment?
-
Fenway Athletic Club plans to offer its members preferred stock with a par value of $100 and a 6% annual dividend rate. If a member wants the following returns, what price should he or she willing to...
-
19.Luna owns a passenger bus driven by her employee, Tomas. One day, the passenger bus collided with a car driven by Graciano. Graciano then filed a complaint for damages based on quasi-delict...
-
Solve the followind tridiagneal system
-
On June 30, Bramble Corp. discontinued its operations in Mexico. On September 1, Bramble disposed of the Mexico facility at a pretax loss of $600,000. The applicable tax rate is 29%. Show the...
-
Pisa Company owns 75 percent of the stock of Siena Company on January 1, 20X3. During 20X3, Siena purchased inventory for $35,000 and sold it to Pisa for $50,000. Of this amount, Pisa reported...
-
On April 1, Pujols, Inc., exchanges $601,600 for 70 percent of the outstanding stock of Ramirez Corporation. The remaining 30 percent of the outstanding shares continued to trade at a collective fair...
-
From the trial balance of Gremlins plc on 31 March 2010 identify the assets and expenses (debit balances) and income, liabilities, and equity (credit balances). Confirm that the trial balance is in...
-
Trade credit from suppliers is a very costly source of funds when discounts are lost. Explain why many firms rely on this source of funds to finance their temporary working capital.
-
Which metal could you use to reduce Mn 2+ ions but not Mg 2+ ions?
-
Here are key financial data for House of Herring, Inc.: Earnings per share for 2018 .....................................$5.50 Number of shares outstanding ..............................40 million...
-
Which of the following U.S. investors have tax reasons to prefer companies that pay out cash by repurchases instead of cash dividends? Which should not care? a. A pension fund b. An individual...
-
Halfshell Seafood is still generating good profits, but growth is slowing down. How should its CFO decide when to start up a program of paying out cash to stockholders? What questions should the CFO...
-
Diggins Excavation has a contractors equipment policy written on a scheduled basis. What is "scheduled" on this kind of policy? (Search Chapter 9) a. the locations at which Diggins is using its...
-
Segn el libro de Robbins, Coulter, y eCenzo, D. A. (2020). Fundamentals of management (11. a ed. Que es Compensacin y beneficios
-
The purpose of the Exclusion for Qualified Principal Residence Indebtedness is to provide tax relief on canceled debt for many homeowners involved in a mortgage foreclosure. Taxpayers can exclude...
Study smarter with the SolutionInn App