Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you? Explain.
Not what you're looking for?
1. Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you? Explain.
2. Explain a stock dividend and further explain if you would prefer it to a cash dividend.
3. What are stock splits and how desirable are they?
Purchase this Solution
Solution Summary
Extensive discussion of 774 words plus references.
Solution Preview
Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you? Explain.
Periodic share repurchase are becoming now more popular because it is increasing the earnings per share post repurchase. This is because the number of shares outstanding gets reduced and its cost of capital is also reduced. This also increase the ownership percentage of the remaining shareholders. Moreover share repurchase does not attract any dividend taxes.
Moreover once a dividend is put in place, it will be negative if it is decreased or ceased in the future but that is not the case with buyback. Thus buyback has more appeal.
Explain a stock dividend and further explain if you would prefer it to a cash dividend.
As a part of the financing decision the dividend policy of the firm is a residual decision and the dividends are a passive residual. So long firm is able to earn more than the equity capitalization rate than the investors would be content with the firm retaining the earning. In contrast if the firm were able to earn less than the equity capitalization rate investors would prefer to ...
Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance
These questions will test you on your knowledge of finance.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking