Resisted paying dividends

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Reference no: EM131915828

Your firm has had steady earnings for many years but it has resisted paying dividends. It typically uses its earnings to finance replacement of its worn out assets, thus saving the cost of borrowing money to do this. Its stock price has not risen much in recent years. The Drucker-educated consultant tells the CEO to start paying a modest dividend out of earning. "The borrowing costs you will incur by occasionally having to raise money with debt will be outweighed by a subtle benefit." What subtle benefit is the consultant referring to?

Reference no: EM131915828

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