(a) The coronavirus pandemic led to the enforced closure of some businesses (e.g. theatres and eat-in restaurants) and reduced demand for many businesses that remained open. This has led to falls in revenue and earnings and, ultimately, cash flow problems for many companies. Because of this increased financial distress, we have seen many companies cut cash dividends as one strategy to conserve cash. (0) Use signalling theory to discuss the likely market reaction to announcements related to these dividend cuts. (6 marks) What alternative payout policy device might companies use to reduce the need for, or amount of, dividend cuts and therefore conserve cash? (3 marks) Using the information below on your allocated company, qualitatively determine the level of payout you would expect, providing an explanation that applies relevant factors suggested by theory. (11 marks) Adairs (ADH) Profitable, pays corporate tax in Australia and is in a position to pay fully franked dividends. Unlevered beta adjusted for cash for its industry is 0.90 Earnings are somewhat volatile About half of its assets are inventories, plant, property and equipment. Concentrated share ownership Free cash flows have been growing steadily over time Growth opportunities are low and mostly expected (a) The coronavirus pandemic led to the enforced closure of some businesses (e.g. theatres and eat-in restaurants) and reduced demand for many businesses that remained open. This has led to falls in revenue and earnings and, ultimately, cash flow problems for many companies. Because of this increased financial distress, we have seen many companies cut cash dividends as one strategy to conserve cash. (0) Use signalling theory to discuss the likely market reaction to announcements related to these dividend cuts. (6 marks) What alternative payout policy device might companies use to reduce the need for, or amount of, dividend cuts and therefore conserve cash? (3 marks) Using the information below on your allocated company, qualitatively determine the level of payout you would expect, providing an explanation that applies relevant factors suggested by theory. (11 marks) Adairs (ADH) Profitable, pays corporate tax in Australia and is in a position to pay fully franked dividends. Unlevered beta adjusted for cash for its industry is 0.90 Earnings are somewhat volatile About half of its assets are inventories, plant, property and equipment. Concentrated share ownership Free cash flows have been growing steadily over time Growth opportunities are low and mostly expected