COMM 122 Lecture Notes - Lecture 2: Net Present Value, Capital Structure, Dividend Policy

• School: Queen's University
• Department: Commerce
• Course: COMM 122
• Professor: Evan Dudley

Document Summary

Per share stock price would decrease by the value of the dividend divided by total number of outstanding shares on the ex-dividend date. The value of the company would decrease by the total value of the dividend on the ex-dividend date. If million were issued as a dividend to 1 million shares outstanding, the share price would decrease by per share on the ex-dividend date. The value of the firm would decrease by million on the ex-dividend date. Expanding its manufacturing capability could also either increase or decrease the value of the firm depending on whether the project has a positive or negative. If the e(cid:454)pa(cid:374)sio(cid:374) p(cid:396)oje(cid:272)t"s npv is positi(cid:448)e, the(cid:374) fi(cid:396)(cid:373) (cid:448)alue (cid:449)ould i(cid:374)(cid:272)(cid:396)ease and vice versa: the p/e ratio would increase because the number of shares (denominator) decreases. Return on assets would be unchanged because both net income and total assets remain constant.