Ask Question
BusinessBusiness
16 October, 05:32

Some of Alpha's Board members are worried that shareholders are expecting a dividend next year and that announcing plans to skip next year's dividend will lower the stock price today. Suppose Alpha were to announce instead that it plans to pay its usual dividend one year from now and that it has no plans for any new investment at T = 1. What will happen to the stock price today?

+1
Answers (1)
  1. 16 October, 05:52
    0
    It depends but is highly probable that the stock price goes down either way

    Explanation:

    Explanation: A listed company that does not invest at least to keep the market growing pace, could be seen as company without ambition, therefore, more likely to lose market share against competitors, therefore to lose revenue, to lose present value and the stock price falls. Since the stock price of a company is based entirely on the value expectation of the company in the future, informing to the market that Alpha is not going to make any investment next year is the same that declaring company is expected to remain at the same size and operation levels than the current year. This view of stagnation is against the common belief that the market is growing naturally by population growth and the increasing capacities of the technology to unlock a new source of market growth (new product categories, geographies, needs).
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Some of Alpha's Board members are worried that shareholders are expecting a dividend next year and that announcing plans to skip next ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
On March 18, James Smith purchased $7,000.00 of furniture from Home Furnishings on account. The cost of the goods was $4,200.00. On March 20, Home Furnishings granted the customer a $900.00 sales allowance for goods damaged in transit.
Answers (1)
Jan's Jams makes a credit sale for $300 with terms of 2/10, n/30. The cost of the merchandise is $200. The required journal entry to record the sale and the cost of the sale is:
Answers (1)
A perpetuity pays $280 per year and interest rates are 6.7 percent. How much would its value change if interest rates increased to 8.2 percent? (Round your answer to 2 decimal places.)
Answers (2)
Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question.
Answers (1)
If an economy with C = $5000 + 0.6Yd, I = $1000, G = $800, T = $1000, NX = $-200, where the dollar amounts are in millions of dollars, both government spending and taxes are raised by $200 million, what will be the change in equilibrium income (in
Answers (1)
New Questions in Business
On September 1, 2021, Daylight Donuts signed a $188,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2022.
Answers (1)
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is A) following an expansionary monetary policy. B) following a contractionary monetary policy.
Answers (1)
Which types of food items have labor "built in" to their prices? a. make or buy items b. convenience items c. scratch items d. standard items?
Answers (2)
This is a type of individual retirement account that is usually not taxed when money is withdrawn from the account
Answers (1)
Last year, Goran had $30,000 to invest. He invested some of it in an account that paid 7% simple interest per year, and he invested the rest in an account that paid 10% simple interest per year.
Answers (1)
Home » Business » Some of Alpha's Board members are worried that shareholders are expecting a dividend next year and that announcing plans to skip next year's dividend will lower the stock price today.
Sign Up Forgot Password?