Loose Leaf for Corporate Finance Format: Loose-leaf
Loose Leaf for Corporate Finance Format: Loose-leaf
12th Edition
ISBN: 9781260139716
Author: Ross
Publisher: Mcgraw Hill Publishers
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Chapter 19, Problem 5MC
Summary Introduction

To determine: The Implications of Paying Dividend or Upgrading and Expanding the Manufacturing Capacity.

Introduction:The term dividends allude to that portion of proceeds of an organization which is circulated by the organization among its investors. It is the remuneration of the investors for investments made by them in the shares of the organization.  A dividend policy is an organization's way to deal with disseminating revenues back to its proprietors or investors. In the event that an organization is in a development stage, it might conclude that it won't pay profits, but instead re-contribute its retained earnings in the business.

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
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Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY