CFA Level II - Corporate Issuers
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,Types of Dividends - Answer: 1. Regular cash dividends
2. Extra or special (irregular) dividends
3. Liquidating dividends
4. Stock dividends
5. Stock splits
Three Dividend Policy Theories - Answer: 1. Dividend
Irrelevance Theory
2. Bird-in-hand (dividend preference) Theory
3. Tax aversion theory
Dividend Irrelevance Theory - Answer: The theory that a
firm's dividend policy has no effect on either its value or its
cost of capital
bird-in-hand (dividend preference) theory - Answer: Assumes
that investors value a dollar of dividends more highly than a
dollar of expected capital gains, because a certain dividend is
less risky than a possible capital gain. This theory implies that
a high-dividend stock has a higher price and lower required
return, all else held equal.
, Tax aversion theory - Answer: Investors are tax averse to
dividends, prefer companies buy back shares
Six primary factors affecting a company's dividend policy -
Answer: 1. investment opportunities
2. Expected volatility of future earnings
3. financial flexibility
4. tax considerations
5. flotation costs
6. contractual and legal restrictions
Impairment of capital rule - Answer: A legal restriction that
dividends cannot exceed retained earnings.
Double Taxation: Effective Tax Rate - Answer: Corporate Tax
Rate + (1 - Corporate Tax Rate) * (Individual Tax Rate)
Comprehensive Study Guide + Exam
Questions & Solutions Graded A+
Professional Academic Assistance Services
Services Offered
• Proctored Exam Assistance
• Online Class Management (Full Course Support)
• Exam Preparation & Study Materials
• Assignments and Coursework Support
• Essay and Research Paper Writing
• Discussion Posts & Responses
• Editing and Proofreading
• Confidential Academic Consultation
Contact Information
Email:
WhatsApp link: https://wa.me/254704846336
Fast Response | Confidential | Reliable Academic
Support
Helping Students Achieve Academic Excellence
,Types of Dividends - Answer: 1. Regular cash dividends
2. Extra or special (irregular) dividends
3. Liquidating dividends
4. Stock dividends
5. Stock splits
Three Dividend Policy Theories - Answer: 1. Dividend
Irrelevance Theory
2. Bird-in-hand (dividend preference) Theory
3. Tax aversion theory
Dividend Irrelevance Theory - Answer: The theory that a
firm's dividend policy has no effect on either its value or its
cost of capital
bird-in-hand (dividend preference) theory - Answer: Assumes
that investors value a dollar of dividends more highly than a
dollar of expected capital gains, because a certain dividend is
less risky than a possible capital gain. This theory implies that
a high-dividend stock has a higher price and lower required
return, all else held equal.
, Tax aversion theory - Answer: Investors are tax averse to
dividends, prefer companies buy back shares
Six primary factors affecting a company's dividend policy -
Answer: 1. investment opportunities
2. Expected volatility of future earnings
3. financial flexibility
4. tax considerations
5. flotation costs
6. contractual and legal restrictions
Impairment of capital rule - Answer: A legal restriction that
dividends cannot exceed retained earnings.
Double Taxation: Effective Tax Rate - Answer: Corporate Tax
Rate + (1 - Corporate Tax Rate) * (Individual Tax Rate)
