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Case Study - Cooper Industries

Dividend Policy at FPL Group, Inc. (A) & (B)

1. A) Why do firms pay dividends?
Firms pay dividends depending on their financing and investment decisions. If they plan on financing through borrowing, then that releases cash for dividends in order to eliminate having large cash balances on hand. In addition, dividends are an immediate cash payment to the stockholder that they can spend or reinvest.
B) What, in general, are the advantages of paying dividends?
Dividend payments can be considered advantageous as signaling devices in the market. If dividends increase, it is interpreted that the company's value has increased and the stock goes up. If the earnings decrease and the company continues to pay the regular dividends, this makes the statement that the company is sound and the decrease is temporary and in the long run the money will be there. If the company pays out too much, then they can replace the cash by issuing......


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Approximate Word Count: 2239
Approximate Pages: 9 (250 words per double-spaced page)

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