a. What are the potential advantages and disadvantages to a company's shareholders if the company increases the proportion of debt in its capital structure?
b. How do personal taxes affect an investor's preference for high versus low dividend yields?
Source: Adapted from Introduction to Corporate Finance, Second Edition, Booth and Cleary, 2010, John Wiley & Sons Canada, Ltd., Chapter 22, Practice Problem 14, page 906.
Reproduced with permission from John Wiley & Sons Canada, Ltd.c. There is evidence that suggests that dividends have a more stable pattern than earnings. What type of dividend policy is management adopting if it decides to pay a stable dividend in the face of fluctuating earnings, and why might they do so?