a) Market reacts positively to dividend increases and negatively dividend decreases. Threeexplanations are provided for this notion.i. Information content (signalling) hypothesis,ii. Free cash flow hypothesisiii. Clientele effectDiscuss these hypotheses related to dividend policy.(30 marks)(b) Briefly discuss five reasons for companies to choose repurchases rather dividends under aclassical tax system.(30 marks)(c) Identify (interim or final) dividend change using "dividend history from the DatAnalysisPremium Database" for the company allocated to you for the assignment 2.A dividend change is defined as the relative difference from the previous year's level.? Interim dividend change = interim dividend per share in year t minus interim dividend per share inyear t-1.? Final dividend change = Final dividend per share in year t minus Final dividend per share in yeart-1.Step 2Announcement date for the dividend change can be identified from "ASX announcements from theDatAnalysis Premium Database".? Announcement date for interim dividend change: use the announcement date of half yearlyreport? Announcement date for final dividend change: use the announcement date of preliminary finalreport? Select "ASX announcements"? select "Search option - Click here to refine your search by ASX Announcement Typeand/or text search"? for Announcement Type: select periodic reports? for Sub-Announcement Type: select preliminary - final statement for final dividend; halfyearly report interim dividend change? specify the date rageStep 3(i) Calculate three day return earned by your firm for the period from the day before theannouncement continuing through the day after the announcement date; and two day return earnedby your firm for the period from the day of the announcement to the day after the announcementdate(ii) Calculate the market return for the corresponding periods in (i).(iii) Calculate the excess: (i) - (ii)Step 4Check the results for any other two students in your tutorial class and report that result in yourassignment 2Step 5Discuss the relevant theory with the findings in Step 3 and Step 4

FIN3CFI Corporate Finance Semester 1, 2016 Assignment 2 Need to be submitted to the tutor, in class, in Week 12 (a) Market reacts positively to dividend increases and negatively dividend decreases. Three explanations are provided for this notion. i. Information content (signalling) hypothesis, ii. Free cash flow hypothesis iii. Clientele effect Discuss these hypotheses related to dividend policy. (30 marks) (b) Briefly discuss five reasons for companies to choose repurchases rather dividends under a classical tax system. (30 marks) (c) Identify (interim or final) dividend change using "dividend history from the DatAnalysis Premium Database" for the company allocated to you for the assignment 2. A dividend change is defined as the relative difference from the previous year's level. Interim dividend change = interim dividend per share in year t minus interim dividend per share in year t-1. Final dividend change = Final dividend per share in year t minus Final dividend per share in year t-1. Step 2 Announcement date for the dividend change can be identified from "ASX announcements from the DatAnalysis Premium Database". Announcement date for interim dividend change: use the announcement date of half yearly report Announcement date for final dividend change: use the announcement date of preliminary final report Select "ASX announcements" select "Search option - Click here to refine your search by ASX Announcement Type and/or text search" for Announcement Type: select periodic reports for Sub-Announcement Type: select preliminary - final statement for final dividend; half yearly report interim dividend change specify the date rage Step 3 (i) Calculate three day return earned by your firm for the period from the day before the announcement continuing through the day after the announcement date; and two day return earned by your firm for the period from the day of the announcement to the day after the announcement date (ii) Calculate the market return for the corresponding periods in (i). (iii) Calculate the excess: (i) - (ii) Step 4 Check the results for any other two students in your tutorial class and report that result in your assignment 2 Step 5 Discuss the relevant theory with the findings in Step 3 and Step 4. (40 marks) (30 + 30 + 40 = 100 marks)