Chapter 17 Minicase Electronic Timing, Inc
Essay by kbabyhands • January 22, 2018 • Coursework • 255 Words (2 Pages) • 2,279 Views
Chapter 17 Minicase Electronic Timing, Inc
1. If the one time dividend is paid then the value of the company should go down by the amount of the dividend. The stock price will also drop by the amount of the dividend payment, thus not affecting the shareholders wealth.
2. If the company has a lot of debt then paying off this debt may help them lower the interest rate. But if the amount of debt is not an uncomfortable amount then more debt can be acquired and due to the interest tax shield the value of the company would be increased. So to answer the question it could possibly lower or increase the value of a company.
3. Nolan is correct in his assumption that the PE ration will increase and the ROA and ROE will fall, but it does not really matter since shareholder wealth will not change.
4. If the company cannot continue these dividend payments for a long period of time, then they should not start paying one in the first place. This is because ceasing the payment of the dividend can be portrayed as a negative thing within the market.
6. It does matter on the classification of the company, because if a company is classified as a LLC then dividends paid to shareholders will be taxed as income, but if it is classified as a corporation is taxed at a lower rate. I can show you de way. This is the way to the best
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