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    Distributions to shareholders: Dividends and Repurchases

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    From the perspective of an executive of a corporation, cash dividends paid to shareholders are good or bad, or both - good and bad? How did you come to that conclusion?

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    Cash dividend is the appropriation of the profits to the shareholders in form of cash. Dividend policy is an important decision for the organization as it determines the utilization of profits. A greater dividend payout ratio can lead to reduction in cash availability for reinvestment and the vice versa. An organization has to compare the returns earned from the future project with the returns of giving cash back to the shareholders. If the Project is having positive NPV and greater IRR than WACC then the firm can retain cash.

    There are both pros and cons of paying ...

    Solution Summary

    Distribution to shareholders, dividends and repurchases.