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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: http://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?

Accounting Basics, Accounting

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