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CHAPTER 19
ELECTRONIC TIMING, INC.
1. The value of the company will decline by the amount of the dividend. Ignoring taxes, shareholder
wealth will not be affected because the stock price will drop by the amount of the dividend payment.
2. The value of the company could increase or decrease. If the company is over-levered, paying off debt
4. A regular dividend payment is something the company should probably not undertake. A company
5. The implication is that the company should not retain earnings unless the ROE of the new project is
greater than the shareholders required return on equity. This is an intuitive result. Shareholders want
6. The decision does depend on the organizational form of the company. Money paid to shareholders of
