Basically companies have an optimal cash reserve. Below that optimum a dollar in the company increases future discounted cashflow of company by more than a dollar -> They should raise money. Above that optimum a dollar in the company increases the future discounted cashflows of the company by less than a dollar -> They should hand out money.

Because of transaction costs there is in practice a zone where they should neither raise nor give dividends.

Close to the optimum a dollar in dividend will change the value of the company by approximately one dollar.