Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Jake owns 100 shares of company X' stock and has been receiving dividend for the past few years. Very recently the company announced

image text in transcribed

2. Jake owns 100 shares of company X' stock and has been receiving dividend for the past few years. Very recently the company announced (and market expects) that it will continue to pay dividend for the next 5 years but will cease to pay dividend after that indefinitely. Jake says, "I am okay with receiving no more dividend after that, because future cashflow doesn't have to be future dividends but can also be future selling price. I will still get the cash by selling my shares in 5 years. That's why I'm fine with company paying no more dividend in the future." Analyze Jake's remarks, making sense or are there any flawed arguments?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

11th Canadian edition Volume 1

1119048532, 978-1119048534

More Books

Students also viewed these Accounting questions