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Home Q & A Board Other Fields Homework Help Business Management
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stranahan stranahan
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7 years ago
In a world without taxes or transaction costs, it can be argued that dividend policy is irrelevant for shareholder value and cash flow. With a no-dividend policy, the current price is and will remain $100.00 per share. With a high-dividend policy, the current price is $100.00 per share and the value falls to $95 per share upon payment of the dividend.
Use the following example to demonstrate dividend policy irrelevance.
No-dividend Policy   High-dividend Policy
5,000 shares owned   5,000 shares owned
$100.00 current price per share   $100.00 current price per share
$0.00 dividends per share   $5.00 dividends per share
$25,000 desired cash flow per year   $25,000 desired cash flow per year
Textbook 
Financial Management: Core Concepts

Financial Management: Core Concepts


Edition: 2nd
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macawmatanemacawmatane
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7 years ago
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stranahan Author
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#2
7 years ago
Thank you very much for this. It's really helpful.
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#3
4 years ago
 Write a comment below, like thank you
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