台湾大学：《财务管理》（英文版） Chapter 16 Dividend Policy

Fundamentals of Corporate Finance Third edition Chapter 16 Dividend Brealey Myers Marcus Policy ndamentals of Corporate Finan Brealey Myers Marcus slides by Matthew will IrwinMcGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 1 Irwin/McGraw-Hill Chapter 16 Fundamentals of Corporate Finance Third Edition Dividend Policy Brealey Myers Marcus slides by Matthew Will Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc.,2001

16-2 Topics Covered SHow Dividends are Paid SHow Do Companies decide on dividend Payments sWhy Dividend Policy Should Not matter SWhy Dividends May Increase Firm Value S Why Dividends May reduce Firm value Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 2 Irwin/McGraw-Hill Topics Covered How Dividends are Paid How Do Companies Decide on Dividend Payments Why Dividend Policy Should Not Matter Why Dividends May Increase Firm Value Why Dividends May Reduce Firm Value

16-3 Dividend payments Cash Dividend Payment of cash by the firm to its shareholders Ex-Dividend date- Date that determines whether a stockholder is entitled to a dividend payment; anyone holding stock before this date is entitled to a dividend Record date- Person who owns stock on this date received the dividend Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 3 Irwin/McGraw-Hill Dividend Payments Record Date - Person who owns stock on this date received the dividend. Ex-Dividend Date - Date that determines whether a stockholder is entitled to a dividend payment; anyone holding stock before this date is entitled to a dividend. Cash Dividend - Payment of cash by the firm to its shareholders

16-4 Dividend payments Stock dividend -Distribution of additional shares to a firm's stockholders Stock Splits- Issue of additional shares to firm's stockholders Stock Repurchase- Firm buys back stock from its shareholders Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 4 Irwin/McGraw-Hill Dividend Payments Stock Repurchase - Firm buys back stock from its shareholders. Stock Dividend - Distribution of additional shares to a firm’s stockholders. Stock Splits - Issue of additional shares to firm’s stockholders

16-5 Dividend payments Jul 28 Aug 10 Aug l1 Aug 13 Sept 1o Declaration With EX-dividend Record Payment date dividend date date date date Share price falls Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 5 Irwin/McGraw-Hill Dividend Payments Jul 28 Aug 10 Aug 11 Aug 13 Sept 10 Declaration With- Ex-dividend Record Payment date dividend date date date date Share price falls

16-6 Stock dividend Example -Amoeba Products has 2 million shares currently outstanding at a price of $15 per share The company declares a 50% stock dividend. How many shares will be outstanding after the dividend is paid? Answer 2 mil x 50=1 mil +2 mil =3 mil shares Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 6 Irwin/McGraw-Hill Stock Dividend Example - Amoeba Products has 2 million shares currently outstanding at a price of $15 per share. The company declares a 50% stock dividend. How many shares will be outstanding after the dividend is paid? Answer 2 mil x .50 = 1 mil + 2 mil = 3 mil shares

16-7 Stock dividend Example -cont- After the stock dividend what is the new price per share and what is the new value of the firm? Answer O The value of the firm was 2 mil x $15 per share,or S30 mil. After the dividend the value will remain the same O Price per share=$30 mil /3 mil sh=$10 per sh Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 7 Irwin/McGraw-Hill Stock Dividend Example - cont - After the stock dividend what is the new price per share and what is the new value of the firm? Answer The value of the firm was 2 mil x $15 per share, or $30 mil. After the dividend the value will remain the same. Price per share = $30 mil / 3 mil sh = $10 per sh

16-8 Stock Repurchase Example- Cash dividend versus share repurchase Assets Liabilities& equity A. Original balance sheet Cash $150,000Debt Other assets 850,000 Equity ,000,000 Value of Firm 1.000.000 Value of Firm 1.000.000 Shares outstanding= 100,000 Price per share=$1,00000/100,000=$10 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 8 Irwin/McGraw-Hill Stock Repurchase Assets Liabilities & Equity A. Original balance sheet Cash $150,000 Debt 0 Other assets 850,000 Equity 1,000,000 Value of Firm 1,000,000 Value of Firm 1,000,000 Shares outstanding = 100,000 Price per share = $1,000,000 / 100,000 = $10 Example - Cash dividend versus share repurchase

16-9 Stock Repurchase Example- Cash dividend versus share repurchase Assets Liabilities& 2 Equi的 B. After cash dividend Cash $50,000Debt Other assets 850.000 Equity 900.000 Value of Firm 900,000 Value of Firm 900,000 Shares outstanding= 100,000 Price per share=$900,000/100,000=$9 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 9 Irwin/McGraw-Hill Stock Repurchase Assets Liabilities & Equity B. After cash dividend Cash $50,000 Debt 0 Other assets 850,000 Equity 900,000 Value of Firm 900,000 Value of Firm 900,000 Shares outstanding = 100,000 Price per share = $900,000 / 100,000 = $9 Example - Cash dividend versus share repurchase

16-10 Stock Repurchase Example- Cash dividend versus share repurchase Assets Liabilities Equity C. After stock repurchase Cash $50,000Debt Other assets 850,000 Equity 900.000 Value of Firm 900,000 Value of Firm 900,000 Shares outstanding=90,000 Price per share=$900,000/90,000=$10 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001

©The McGraw-Hill Companies, Inc.,2001 16- 10 Irwin/McGraw-Hill Stock Repurchase Assets Liabilities & Equity C. After stock repurchase Cash $50,000 Debt 0 Other assets 850,000 Equity 900,000 Value of Firm 900,000 Value of Firm 900,000 Shares outstanding = 90,000 Price per share = $900,000 / 90,000 = $10 Example - Cash dividend versus share repurchase