If the firm has excess liquidity, its shareholders consist of High Networth Individuals sunjected to the highest income tax rates, its ROE is very low compared to the peers, the firm should (Select the most appropriate option) Give cash dividend Give dividend in kind Give bonus shares Give buyback option Hold on to the cash

If the firm has excess liquidity, its shareholders consist of High Networth Individuals sunjected to the highest income tax rates, its ROE is very low compared to the peers, the firm should (Select the most appropriate option) Give cash dividend Give dividend in kind Give bonus shares Give buyback option Hold on to the cash

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose that AC Corp. distributes its cash to shareholders as a dividend and raises new equity to fund the investment. For each question assume the firm operates in perfect capital markets. a.) How many shares will AC need to issue to fund the investment? b.) What is the new stock price? c.) After the transaction, what is the total value of existing shareholders' shares plus the cash payout? d.) What is the total value of the new shareholders' shares (assume that old shareholders do not purchase any of the new shares)? e.) What is the change in firm value due to this transaction? f.) Suppose AC used its cash to fund the investment instead, what is the total value of the shareholders' shares? Relevant information for AC Corp. is given below Cash 30 Shares outstanding 50 Current share price $6.60 Amount needed to…
Which statement below is incorrect? Select one: A. Compared to interview, survey is more suitable to ask standardised questions. B. If a firm has more intangible assets, according to the trade-off theory, it is more likely to have a higher leverage. C. If a firm is more profitable, according to the pecking order theory, it should use less debt for financing. D. The CAPM model implies that a stock with a higher beta has a higher return on average.
Dividend policy and company value: You have just encountered two identical companies with identical investment opportunities, as well as the ability to fund these opportunities. You have found that one of the companies has just announced an introductory dividend policy, whereas the other has continued with a no-dividend policy. Which of the two companies is worth more? Explain
Discuss the Modigliani and Miller theory. What did Modigliani and Miller assume about taxes and brokerage costs when they developed their dividend irrelevance theory? Discuss the bird - in - hand theory of dividends. How did the bird - in - hand theory get its name? What have been the results of the empirical tests of the dividend theories?
Please help me correctly pls
Wolseley manufacturing Co. invests in a group of risky projects, which increases the unsystematic risk of the firm, but does not change the systematic risk of the firm. All else the same, the expected risk premium on its common stock is most likely to: Select one: a. Increase, because the difference between the expected return on the firm's stock and the risk-free rate will widen. b. Increase or decrease, depending on the internal rate of return of the new projects. c. Decrease, because the difference between the expected return on the firm's stock and the risk-free rate will widen. d. Decrease, because the difference between the expected return on the firm's stock and the risk-free rate will narrow. e. Remain unchanged, because the level of systematic risk is unchanged.

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