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GROUP MEMBERS

GROUP MEMBERS. MOHD ARIF HJ. HAMZAH UUM ID 801989 2. ABD AZIS BIN SALLEH UUM ID 801975 3. ER SHEAU JIA UUM ID 803734 4. TAN YONG SOON UUM ID 804571. 1. 1. CORPORATE FINANCE. CHAPTER 18 DIVIDENDS AND OTHER PAYOUTS. 2. 2. CORPORATE FINANCE. TABLE OF CONTENTS CHAPTER 18.

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GROUP MEMBERS

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  1. GROUP MEMBERS • MOHD ARIF HJ. HAMZAH UUM ID 801989 2. ABD AZIS BIN SALLEH UUM ID 801975 3. ER SHEAU JIA UUM ID 803734 4. TAN YONG SOON UUM ID 804571 1 1 CORPORATE FINANCE

  2. CHAPTER 18 DIVIDENDS AND OTHER PAYOUTS 2 2 CORPORATE FINANCE

  3. TABLE OF CONTENTS CHAPTER 18 18.1 DIFFERENT TYPES OF DIVIDENDS 18.2 STANDARD METHODE CASH DIVIDEND PAYMENT 18.3 DIVIDEND POLICY 18.4 REPURCHASE OF STOCK 18.5 PERSONAL TAXES AND DIVIDENDS 18.6 FACTORS FAVORING A HIGH DIVIDEND POLICY 18.7 EFFECT REAL WORLD FACTOR 18.8 ABOUT DIVIDEND POLICY 18.9 STOCK DIVIDENDS AND STOCK SPLIT 3 3 CORPORATE FINANCE

  4. WHAT WE KNOW AND DO NOT KNOW ABOUT DIVIDEND POLICY • CORPORATE DIVIDENDS ARE SUBSTANTIAL Dividends are taxed as ordinary income. Dividends are tax disadvantaged relative to capital gains because dividends are taxed upon payment whereas taxes on capital gain are deferred until sale. • FEWER COMPANIES PAY DIVIDENDS Although dividends are substantial, Dividends can reduce internal sources of financing. Fewer companies pay dividends 4 4 CORPORATE FINANCE

  5. WHAT WE KNOW AND DO NOT KNOW ABOUT DIVIDEND POLICY • CORPORATION SMOOTH DIVIDENDS Dividend policy for real world company, typically set long term target ration of dividends to earning. Set a low target ratio if it has many positive NPV project relative to available cash flow and set a high ratio if it has fewer positive NPV project. • PAYOUTS PROVIDE INFORMATION TO THE MARKET Investor are looking at current dividends for clues concerning the level of future earnings and dividends 5 5 CORPORATE FINANCE

  6. WHAT WE KNOW AND DO NOT KNOW ABOUT DIVIDEND POLICY • A SENSIBLE PAYOUT POLICY Firm with many positive NPV projects relative to available cash flow should have low payout ratio. Firm with fewer positive NPV project relative to available cash flow might want to consider higher payouts. • SOME SURVEY EVIDENCE ABOUT DIVIDENDS Personal taxes paid on dividends by shareholders a very important. 6 6 CORPORATE FINANCE

  7. STOCK DIVIDENDS AND STOCK SPLITS • STOCK DIVIDENDS It is not a true dividend because no cash leaves the firm. The firm increases the number of shares outstanding. Stock dividend is commonly expressed as a ratio • STOCK SPLIT Same thing as a stock dividends except that a split is expressed as a ratio instead of a percentages. Each share is split up to create additional share. 7 7 CORPORATE FINANCE

  8. THANK YOU 8 8 CORPORATE FINANCE

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