Capital Structure
In an attempt to raise additional capital to finance a major expansion, Axetem, Inc. is creating a steering committee to help devise an improved dividend policy to help attract more stock investors. You have been chosen as one of the participants in the steering committee.
During the committee’s initial meeting, you discussed how the “clientele effect” should receive a major consideration in devising an effective dividend policy for Axetem. You also discussed other factors that can also influence a company’s dividend policy.
Following your meeting, one of the members of the steering committee e-mails you with some follow-up questions. Write 1–2 pages that respond to the following in response to her e-mail:
- What is the purpose of a dividend policy?
- What 3 factors influence the direction of a dividend policy?
- How does the implementation of or changes to a dividend policy usually affect stock prices?
- What recommendations can you provide moving forward?
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Capital Structure
As one of the participants in the steering committee, there are several roles that I would play towards ensuring that the company, Axetem Inc. develops a dividend policy for its investors. The aim of developing the dividend policy is to help attract more stock investors into the company so as to finance a major expansion that is being planned by the company. There are several purposes that are played by a dividend policy. It ensures that the shareholders receive an earning from their investments.
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