Assignment

In an attempt to raise additional capital to finance a major expansion, Axetem, Inc. is creating a steering committee to help devise an improved dividend policy to help attract more stock investors. You have been chosen as one of the participants in the steering committee.

During the committee's initial meeting, you discussed how the "clientele effect" should receive a major consideration in devising an effective dividend policy for Axetem. You also discussed other factors that can also influence a company's dividend policy.

Following your meeting, one of the members of the steering committee e-mails you with some follow-up questions. Write 1-2 pages that respond to the following in response to her e-mail:

• What is the purpose of a dividend policy?
• What 3 factors influence the direction of a dividend policy?
• How does the implementation of or changes to a dividend policy usually affect stock prices?
• What recommendations can you provide moving forward?