--%>
Assignment Help - homework help

Effect of illegal obligations on cost of equity

If dividends paid to common stockholders are not legal obligations of a corporation, is the cost of equity zero?  Describe your answer.

Even though common stockholders do not contain a contractual claim on dividends the funds supplied by stockholders definitely contain a cost.  Equity investors are paid last and therefore they are taking the greatest risk among all of the suppliers of capital.  If the company does not get a higher rate of return onto equity funds to compensate for the higher risk taken through equity investors, the price of the stock will fall and thus the value of the firm. 

   Related Questions in Managerial Accounting

  • Q : Problem related to budget surplus Refer

    Refer to the below data. A budget surplus occurred in year: A) 2. B) 3. C) 4. D) 6. Provide solution of th

    		•
  • Q : What is Cost Finding Cost Finding :

    Cost Finding: Cost finding methods generate cost data by analytical or sampling techniques. Cost finding methods are suitable for certain type of costs, like indirect costs, items with costs underneath set thresholds in the programs,

    		•
  • Q : Techniques to liberate the function of

    Write down the different techniques employed to liberate the function of management accounting?

    		•
  • Q : Ravenna Please see attached. Do tutors

    Please see attached. Do tutors provide assistance as to how they came about their answers?

    		•
  • Q : Allocating resources in decision making

    Write down a short note on the Allocating resources in decision making process?

    		•
  • Q : Define Investor Relations Investor

    Investor Relations: A department, exist in most medium to big public companies, which gives investors with a precise account of the company's affairs. This aids investors to make informed sell or buy decisions. Inv

    		•
  • Q : Regions of decision making process What

    What are the possible broad regions of decision making process where management accounting information is required?

    		•
  • Q : Main working areas of the Routing and

    Write a short note on the main working areas of the Routing and personnel department?

    		•
  • Q : Define Cost Avoidance Cost Avoidance :

    Cost Avoidance: The action taken to decrease future costs, like replacing parts before they fail and cause harm to other portions. Cost avoidance might incur higher (or extra) costs in the short run however the final or life-cycle cost would be lower.

    		•
  • Q : What is a Product Product : Any

    Product: Any traceable, discrete, or measurable good or service given to a customer. Frequently goods are termed to as tangible products, and services are termed to as intangible products. A good or service is the product result of a procedure resulta

    		•