Dividend Policy
Instructions:
Part I) Font: Times News Roman; Font size: 11; Double space; Minimum 3 pages-Maximum 5 pages. Part II) Font: Times News Roman; Font size: 11; Double space; Minimum 1 page-Maximum 2 pages. Part I)
Read Chapter, answer the following questions:
1) What are the different types of cash dividends?
2) What are the mechanics of cash dividend payment?
3) How should the price of a stock change when it goes ex dividend?
4) How can an investor create a homemade dividend?
5) Are dividends irrelevant?
6) What are the tax benefits of low dividends?
7) Why might some individual investors favor a high dividend payout?
8) Why might some non-individual investors prefer a high dividend payout?
9) How does the market react to unexpected dividend changes? What does this tell us about dividends? About dividend policy?
10) What is a dividend clientele effect? Please briefly explain.
Part II)
Read the WSJ article carefully, and answer the following questions based on what you have learned about dividend policy.
(link: https://www.ws).com/articles/rolls-royce-may-cut-dividend-as-earnings-outlook-weakens-1447312986)
1) Outlook of RR:
a. What is going on its Operating Cost?
b. What is going on its CAPEX?
c. What is going on its Fixed Cost?
d. RR's market: How is it different from its competitors?
2) What happened to its stock price before the dividend-cut announcement? How do you explain stock market reaction based on what you have learned from Chapter 17?