MGT339H5 Lecture Notes - Lecture 4: Capital Structure, Tender Offer, Dividend Payout Ratio
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Bond: going to get money no matter what, promise of 1000$ Stock: no promise of 1000$ but hopefully price of stock increases in future and maybe you can attain dividend payments. Either hold stock till aug 31 and get + 2$ div or don"t get div e. g. chevelle corp. has 8000 shares of stock outstanding, and declared a dividend of. Tomorrow : 38. 56-1. 30 = 37. 26: the total dividends paid will be: . 30 per share(8,000 shares) = ,400. The equity and cash accounts will both decline by ,400. Pay: reward" for keeping stock in company & the value of the stock is based on the present value of expected future dividends. Not pay: retain funds to reinvest in the firm & in theory, if the firm reinvests capital now, it will grow and can pay higher dividends in the future. Pv = 9000 / 1. 12 + 11,120 / 1. 122 = 16,900. 51.
