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A firm is considering to pay its first dividend ( dividends initiation ) . There is dissension at board level. Some are arguing that dividends
A firm is considering to pay its first dividend dividends initiation There is dissension at board level. Some are arguing that dividends are completely irrelevant, that the value of the firm relies on the quality of management, the growth prospects, the financial discipline RoCE WACC and maintaining financial flexibility should be preserved in all circumstances. Others are arguing that dividends are relevant. Their arguments could be as follows, except: A As the expected dividend yield divshare price will be lower than the cost of debt after tax the WACC will decline significantly, hence increasing the value of the firm. B The reduction in uncertainty for shareholders, as people might have a preference for the certainty of cash vs the uncertainty of price appreciation C The informational content of dividends about the firms financial health, its prospects matters D The existence of a preference for dividend income among some shareholders
A firm is considering to pay its first dividend dividends initiation There is dissension at board level. Some are arguing that dividends are completely irrelevant, that the value of the firm relies on the quality of management, the growth prospects, the financial discipline RoCE WACC and maintaining financial flexibility should be preserved in all circumstances. Others are arguing that dividends are relevant. Their arguments could be as follows, except:
A As the expected dividend yield divshare price will be lower than the cost of debt after tax the WACC will decline significantly, hence increasing the value of the firm.
B The reduction in uncertainty for shareholders, as people might have a preference for the certainty of cash vs the uncertainty of price appreciation
C The informational content of dividends about the firms financial health, its prospects matters
D The existence of a preference for dividend income among some shareholders
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