a) You are examining the historical dividend policy of a large 'blue-chip biotech company, Tech-Tok...
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a) You are examining the historical dividend policy of a large 'blue-chip biotech company, Tech-Tok 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 $- 2016 -1-EPS DPS 2014 $1.60 $0.80 2015 $4.20 $2.10 $4.80 $2.40 2017 3.6 $1.80 2018 2 $1.00 -EPS -DPS What dividend policy does the above chart suggest Tech-Tok has adopted in the past? (4 marks) b) A successful small-cap growth company, TechMax Ltd, also operates in the biotech industry. It has been generating regular earnings over the same period as Tech-Tok 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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