Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 441 Dividend Policy and Clientele ! Assume that you run a phone company, and that you have historically paid la ...

Aswath Damodaran 442 Increases in dividends are signals... of good news.. A firm which announces an increase in dividends is sen ...

Aswath Damodaran 443 An Alternative Story..Dividends as Negative Signals The flip side. A firm that increases or initiates divid ...

Aswath Damodaran 444 The Wealth Transfer Hypothesis 2 5 1 5 0 0. 5 t:- 15 12 - 9 - 6 - 3 0 3 6 9 12 15 CAR (Div Up) C ...

Aswath Damodaran 445 Tools for Assessing Dividend Policy Aswath Damodaran ...

Aswath Damodaran 446 Assessing Dividend Policy ! Approach 1 : The Cash/Trust Nexus Assess how much cash a firm has available to ...

Aswath Damodaran 447 I. The Cash/Trust Assessment ! Step 1 : How much could the company have paid out during the period under qu ...

Aswath Damodaran 448 A Measure of How Much a Company Could have Afforded to Pay out: FCFE ! The Free Cashflow to Equity (FCFE) i ...

Aswath Damodaran 449 Estimating FCFE when Leverage is Stable Net Income ( 1 - ') (Capital Expenditures - Depreciation) ( 1 - ') ...

Aswath Damodaran 450 An Example: FCFE Calculation ! Consider the following inputs for Microsoft in 1996. In 1996 , Microsoft’s F ...

Aswath Damodaran 451 Microsoft: Dividends? ! By this estimation, Microsoft could have paid $ 2 , 127 Million in dividends/stock ...

Aswath Damodaran 452 Dividends versus FCFE: U.S. Most firms pay less in dividends than they have available in FCFE. In recent ye ...

Aswath Damodaran 453 The Consequences of Failing to pay FCFE Chrysler: FCFE, Dividends and Cash Balance ($ 500 ) $ 0 $ 500 $ 1 , ...

Aswath Damodaran 454 ! Application Test: Estimating your firm’s FCFE In General, If cash flow statement used Net Income Net Inco ...

Aswath Damodaran 455 A Practical Framework for Analyzing Dividend Policy HWohawt m itu ccohul ddi dh (^) athvee fipramid p oayu ...

Aswath Damodaran 456 A Dividend Matrix Quality of projects taken: ROE versus Cost of Equity Poor projects Good projects Cash Sur ...

Aswath Damodaran 457 More on Microsoft ! As we noted earlier, Microsoft had accumulated a cash balance of $ 43 billion by 2003 b ...

Aswath Damodaran 458 Microsoft’s big dividend in 2004 ! In 2004 , Microsoft announced a huge special dividend of $ 33 billion an ...

Aswath Damodaran 459 Disney: An analysis of FCFE from 1994 - 2003 Year Net Income Depreciation Capital Expenditures Change in no ...

Aswath Damodaran 460 Disney’s Dividends and Buybacks from 1994 to 2003 Disney^ Year Dividends (in $) Equity Repurchases (in $) C ...