BU393 Chapter Notes - Chapter 13: Share Repurchase, Dividend Tax, Dividend Policy
Document Summary
Companies should retain cash when there is positive npv projects. Etai(cid:374)ed (cid:272)ash used to fi(cid:374)a(cid:374)(cid:272)e proje(cid:272)ts - shareholders earn internal rate of return (higher than req return) Companies should distribute cash when there is negative npv projects. When irr on available projects is < shareholders req return. Shareholders can earn higher returns by investing in other companies w better projects. Dist(cid:396)i(cid:271)utio(cid:374)s payments of cash to shareholders ; come in two forms: dividends and share repurchases. Portion of net income that is paid to common shareholders as cash on a fixed schedule - usually quarterly. 1 time distribution to shareholders - usually larger - something extra + not indication of permanent increase in reg dividends. Dividend paid to common shareholders in form of new shares (not cash) 3 types of share repurchases (cid:894)(cid:272)o(cid:373)pa(cid:374)y (cid:271)uys (cid:271)a(cid:272)k so(cid:373)e of its sha(cid:396)es # of sha(cid:396)es outsta(cid:374)di(cid:374)g is (cid:396)edu(cid:272)ed(cid:895)
