a company announces a change in its dividend policy from a zero target payout ratio to a 100% payout policy, this action could be expected to increase the value of long-term options (say 5-year options) on the firm's stock.

Question

Quizplus · Accepted Answer

A 100% payout policy means the company will distribute all earnings as dividends, leaving less for reinvestment and growth, which could decrease stock price volatility and potentially reduce the value of long-term options.

A Company Announces a Change in Its Dividend Policy from a Zero