I’m working on a computer science discussion question and need an explanation to help me study.
Part 3: Dividend Policy:
Assume that you were recently hired by a national consulting firm, which has been asked to help Adams, Stores, Inc. prepare for its public offering. Prepare a presentation in which you review the theory of dividend policy and discuss the following:
- A. The terms “irrelevance,” “bird-in-the-hand,” and “tax preference” have been used to describe three major theories regarding the way dividend payouts affect a firm’s value. Explain what these terms mean, and briefly describe each theory.
- B. What do the three theories indicate regarding the actions management should take with respect to dividend payout?
- C. What are stock repurchases? Discuss the advantages and disadvantages of a firm’s repurchasing its own shares.
- D. What are stock dividends and stock splits? What are the advantages and disadvantages of stock dividends and stock splits?
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