Question
Q12 (ii) JJ Capital has 50 million ordinary shares on issue. The share price is $20. JJ company paid r $1.00 dividend last year, from
Q12
(ii) JJ Capital has 50 million ordinary shares on issue. The share price is $20. JJ company paid r $1.00 dividend last year, from earnings per share of $1.50. The Board wants to raise the dividend to $1.50 for this year only (a 100% payout ratio) berore returning to $1.00 dividends next year.
Will this one-off $1.50 dividend increase shareholder wealth, decrease it, or have no impact at all on shareholder wealth? Explain your answer, providing a clear description of exactlv how the extra$0.50 dividend per share will affect an investor's wealth. (3 marks.)
(ii) On the day the $1.50 dividend is announced to shareholders, what do you expect the stock price to do in response, and why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started