principles of corporate finance payout policy

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1、confirmingpagesPART5"""""CHAPTERPAYOUTPOLICYANDCAPITALSTRUCTURE16PayoutPolicy!CorporationscanreturncashtotheirshareholdersTofullyunderstandpayoutpolicy,wemustseparatebypayingadividendorbyrepurchasingshares.Inthispayoutdecisionsfrominvestmentandborrowingchapterweexpla

2、inhowfinancialmanagersdecideondecisions.Ifweholdinvestmentandborrowingfixed,theamountandformofpayout,andwediscussthechangesincashdividendsmustbeoffsetbyissuesorcontroversialquestionofhowpayoutpolicyaffectsretirementsofshares.Forexample,acompanymightshareholdervalue.p

3、aygenerouscashdividends,knowingthatitwillhaveSupposeyouownstockinacorporationthathas$1toschedulestockissuestoraisecashforinvestment.pershareofunneededcash.ItcanholdontothecashAnothercompanymightpaynodividends,butinsteadoritcanpayanextracashdividendof$1pershare.usecas

4、htorepurchaseshares.Doesthedecisionmatter?YourfirstinstinctshouldbeThereforewewilltakecaretoanalyzethetrade-offtosayno.Thedividendputs$1pershareinyourpocketbetweenhigherorlowercashdividendsandtheissuebut,atthesametime,eachshareshouldbeworth$1orrepurchaseofcommonstock

5、.Thetrade-offismoreless.Yourwealthshouldbeunaffected.interestingthanyoumightatfirstthink,foratleastthreeButcorporationsusuallyholdcashforareason.reasons.First,changesindividendsconveyinformationWhatifthat$1pershareisnotredundantmoney?aboutthefirm’sprofitabilitytoinve

6、stors.Second,Supposethatitwassetasideforcapitalinvestment.dividendsaretaxedathigherratesthancapitalgains.ThenpayingtheextradividendcouldmeancancelationThird,investorsworrythatcash-cowcorporationswillofinvestmentprojects.Thepayoutdecisioncouldalsorunoutofpositive-NPVi

7、nvestmentsandwastecashonbeaninvestmentdecision.perksorpoorprojects.GenerouscashpayoutsareoneSupposethefirmpaysout$1pershare,butreplaceswayofrelievingsuchworries.thecashbyborrowing.ThenthepayoutdecisionwouldWestartthechapterwithfactsaboutpayoutandaalsobeaborrowingdeci

8、sion.descriptionofhowdividendsandrepurchaseshappen."""""16-1FactsaboutPayoutCorporationscanpayoutcashtotheirshareholdersintwoways.T