a) You are examining the historical dividend policy of a large 'blue-chip' biotech company, Tiger...
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a) You are examining the historical dividend policy of a large 'blue-chip' biotech company, Tiger Ltd. The following chart shows the company's EPS and DPS from 2014 to 2018 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $ 2018 EPS DPS 2014 $1.60 S0.80 2015 $4,20 $2.10 2016 $4.80 $2.40 2017 3.6 $ 1.80 2 $1.00 --EPS -O-DPS What dividend policy does the above chart suggest Tiger has adopted in the past? (4 marks) b) A successful small-cap growth company, Lion Ltd, also operates in the biotech industry. It has been generating regular earnings over the same period as Tiger Ltd, but never pays any cash dividends. Explain this practise of not paying cash dividends based on: (1) The clientele effect (3 marks) (ii) Dividend signalling theory
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