## Exhibit 152 Selected Dividend Yields and Payout Ratios 1993 and 1999

1993 1999

Dividend Yield Payout Ratio Dividend Yield Payout Ratio

1993 1999

Dividend Yield Payout Ratio Dividend Yield Payout Ratio

 Company (%) (%) (%) (%) AT&T 2.51% 44.92% 1.73% 49.72% Apple Computer 1.64 64.39 0 0 Boeing 2.31 27.34 1.35 22.22 Deere 2.70 92.74 2.43 85.44 Disney 0.54 18.35 0.20 8.25 Dow Chemical 4.58 110.82 2.60 57.81 General Motors 1.46 23.36 2.75 22.99 Hewlett-Packard 1.14 19.32 0.86 20.78 McDonald's 0.74 13.82 0.48 13.54 Microsoft 0 0 0 0 Minnesota Mining & Mfg. 3.05 56.45 2.29 51.03 Philip Morris 4.67 63.91 8.00 57.32 Safeway 0 0 0 0 Texaco 4.94 65.84 3.31 84.11 Wal-Mart 0.52 12.81 0.37 16.00

Note: These ratios were calculated with data taken from COMPUSTAT.

Note: These ratios were calculated with data taken from COMPUSTAT.

### The Miller-Modigliani Dividend Irrelevancy Theorem

In their classic article, Miller and Modigliani (1961) examined a firm that wanted to distribute a fixed amount of cash to its shareholders either by repurchasing shares or by paying a cash dividend. The authors assumed that the choice between these two alternatives would affect neither the firm's investment decisions nor its operations. Given these assumptions, they demonstrated that, in the absence of personal taxes and transaction costs, the choice between paying a dividend and repurchasing shares is a matter of indifference. Shareholders are indifferent and firm values are unaffected by which of the two methods is used. Result 15.1 summarizes the Miller-Modigliani dividend irrelevancy theorem.

Result 15.1 (The Miller-Modigliani dividend irrelevancy theorem.) Consider the choice between paying a dividend and using an equivalent amount of money to repurchase shares. Assume:

• There are no tax considerations.

• There are no transaction costs.

• The investment, financing, and operating policies of the firm are held fixed.

Then the choice between paying dividends and repurchasing shares is a matter of indifference to shareholders.

A Proof of the Miller-Modigliani Theorem. To understand Result 15.1, consider two similar equity-financed biotech firms with different dividend policies:

• One firm, Signetics, has announced that it will pay a \$10 million dividend next year.

• The other firm, Comgen, has announced that it will repurchase \$10 million in outstanding shares.

• At the end of the year, the firms will each be worth the same amount, XX (after paying dividends or repurchasing shares), which lies somewhere between \$100 million and \$200 million, depending on industry conditions.

• Each firm initially has 1 million shares outstanding.

These assumptions imply that a share of Signetics stock will sell for one millionth of XX at the end of the year; hence, if XX is \$150 million, each share will be worth \$150. Calculating the year-end value of Comgen stock is slightly more complicated. Comgen will repurchase N shares for \$10 million, implying:

Since the year-end value of Comgen equals XX, its share price must satisfy:

For example, if XX is \$150 million, then equations (15.1) and (15.2), two equations with two unknown variables, can be solved for both N and the share price. With XX equal to \$150 million, Comgen will repurchase 62,500 shares at a price of \$160 per share. In this case, a tax-exempt investor who holds 100 shares of Signetics stock receives a dividend of \$1,000 (\$10 dividend per share) and holds shares worth \$15,000 (\$150 per share). If this same investor holds 100 shares of Comgen stock, he receives no dividends at the end of the year. However, his shares will be worth \$16,000. In both cases, the value of the shares plus the cash dividend (for Signetics) is the same.

Although the above example assumes that the year-end value was \$150 million for both Signetics and Comgen, the equivalence between dividends and share repurchases holds regardless of the firms' year-end values, as long as it is the same for the two firms. The future values of these two corporations are assumed to perfectly track each other regardless of their dividend policies. Thus, the two firms, which differ only in their dividend policies, should sell for the same initial price. If Signetics and Comgen shares sell for different prices, there will be an arbitrage opportunity, as Example 15.1 illustrates.