Although Court will be subject to further taxation when dividends are paid to him from the…
CORRECT A way of aligning management goals to shareholder’s interest is to tie managerial compensation to the market value of the firm’s stock.…
Company uses cash to pay dividend, and this reduces the company’s assets and the company’s equity. Thus, stock price of the company decrease to compensate for the drop in the company’s assets and the company’s equity.…
A stock dividend will affect common stock, paid-in capital and retained earnings account. However, total stockholders equity will not be affected.…
The problem with Hobby Horse Company is that they were having a tough year throughout 2011. The company has $45 million loan that is due at the end of September, however the company does not have the means to cover the cost of the loan. Looking at the financial statement the company has fairly high leverage where their equity is not as strong. In addition, their current assets don’t cover current liabilities—meaning that the company is not as liquid. For the year 2011, shareholders would not be better off in terms of investing in this company due to low return on capital for that year. For shareholders to actually benefit from this, earning a higher return would allow them to invest on their own in financial markets. Shareholders want the companies to invest only in projects for which the return on capital is at least as great as the cost of capital.…
For a corporation, 70% of dividends received are excluded from taxes; therefore, taxable dividends are calculated as $15,000(1 – 0.70) = $4,500.…
6. Understand capital structure theories as well as real world factors that affect capital structure decisions…
2) The terms “irrelevance,” and “dividend preference, or bird-in-the-hand,” and “tax effects” have been used to describe three major theories regarding the way dividend payout…
| | |retained earnings and thus additional equity investment by stockholders in Year 8. |…
Stock Dividend in Form: Section 25-2 explains that the number of additional shares issued as stock dividend may impact the the market price. So the company will make a stock Split.…
An increase in a firm’s expected growth rate would normally cause the firm’s required rate of return to…
d. Future growth prospects including expected earnings growth, which affects future ROE, which is used in the calculation of the equity value-to-book multiple. The future earnings of a company are expected to be high (low) due to its future growth potential, which may be predicted by numerous indicators including the sales growth rate.…
· Dividends have no impact on the value of a company, the stockholders can “create” dividends by simply selling the stock…
2. A company that wants to maximize earnings per share may either over invest or use too much debt.…
total stockholder’s equity. The three primary drivers of ROE are better sales (or turnover), greater margins…