ch17 - Fundamentals of Corporate Finance 2/e ROBERT PARRINO...

This preview shows page 1 - 9 out of 66 pages.

Fundamentals of Corporate Finance, 2/e ROBERT PARRINO, PH.D. DAVID S. KIDWELL, PH.D. THOMAS W. BATES, PH.D.
Image of page 1

Subscribe to view the full document.

Chapter 17: Dividends, Stock Repurchases, and Payout Policy
Image of page 2
Learning Objectives 1. EXPLAIN WHAT A DIVIDEND IS, AND DESCRIBE THE DIFFERENT TYPES OF DIVIDENDS AND THE DIVIDEND PAYMENT PROCESS. CALCULATE THE EXPECTED CHANGE IN A STOCK’S PRICE AROUND AN EX- DIVIDEND DATE. 2. EXPLAIN WHAT A STOCK REPURCHASE IS AND HOW COMPANIES REPURCHASE THEIR STOCK. CALCULATE HOW TAXES AFFECT THE AFTER-TAX PROCEEDS THAT A STOCKHOLDER RECEIVES FROM A DIVIDEND AND FROM A
Image of page 3

Subscribe to view the full document.

Learning Objectives 3. DISCUSS THE BENEFITS AND COSTS ASSOCIATED WITH DIVIDEND PAYMENTS AND COMPARE THE RELATIVE ADVANTAGES AND DISADVANTAGES OF DIVIDENDS AND STOCK REPURCHASES. 4. DEFINE STOCK DIVIDENDS AND STOCK SPLITS AND EXPLAIN HOW THEY DIFFER FROM OTHER TYPES OF DIVIDENDS AND FROM STOCK REPURCHASES. 5. DESCRIBE FACTORS THAT
Image of page 4
Dividends o The term payout policy is generally used to refer to a firm’s overall policy regarding distributions of value to stockholders. o A dividend is something of value that is distributed to a firm’s stockholders on a pro-rata basis—that is, in proportion to the percentage of the firm’s shares that they own. o A dividend can involve the distribution of cash, assets, or something else, such as discounts on the firm’s products that are available only to stockholders.
Image of page 5

Subscribe to view the full document.

Dividends o When a firm distributes value through a dividend, it reduces the value of the stockholders’ claims against the firm. o Reduces the stockholders’ investment in a firm by returning some of that investment to them. o The value that stockholders receive through a dividend was already theirs and so a dividend simply takes this value out of the firm and returns it to stockholders. Khi m t công ty phân ph i các giá tr
Image of page 6
Dividends o TYPES OF DIVIDENDS Regular Cash Dividend The most common form, it is the cash dividend that is paid on a regular basis. Are generally paid on a quarterly basis and are a common means by which firms return some of their profits to stockholders. The size of a firm’s regular cash dividend is typically set at a level that management expects the company to be able to maintain in the long run, barring some major change in the fortunes of the company. c t c ti n m t thuong xuyen ổ ứ Hình th c ph bi n nh t, nó là c t c ti n m t đ c tr m t cách ế ổ ứ ượ th ng xuyên. ườ Th ng đ c thanh toán trên c s hàng quý và là m t ph ng ườ ượ ơ ươ ti n ph bi n mà các công ty l i m t s l i nhu n cho các c ế ố ợ đông.
Image of page 7

Subscribe to view the full document.

Dividends o TYPES OF DIVIDENDS Extra dividends  Management can afford to err on the side of setting the regular cash dividend too low because it always has the option of paying an extra dividend if earnings are higher than expected.
Image of page 8
Image of page 9
  • Fall '13
  • RobertParrino
  • Dividends, Dividend, firm value

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern