Question
[Question 1] RJR Nabisco had experienced slow growth of revenues over the past few years. In response to stockholder pressure, it announced a significant increase
[Question 1] RJR Nabisco had experienced slow growth of revenues over the past few years. In response to stockholder pressure, it announced a significant increase in dividends paid to stockholders financed by the sale of some of its assets. What would you expect the stock price reaction to the announcement, and why? Will the asset sale and increase of payout improve firm performance? [Question 2] Using the information in previous question, RJR Nabisco also had $10 billion in bonds outstanding at the time of the dividend increase. How would you expect the bondholders to react to the announcement? Why?
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