Suppose a firm maintains its preferred debt-equity and pays dividends only after meeting its investment needs, what type of dividend policy is being referred to? A. Stable B. Hybrid C. Compromise D. Residual

Q: It is assumed that the Cost of equity and rate of return are both constant under Walter’s Model of…

A: Solution:- Walter’s Model of Dividend is a relevant dividend model, which implies that the dividend…

Q: If the debt component in the capital structure is predominant –

A: Debt: It is a part of the capital structure that involves bonds, loans, etc. Introducing debt to the…

Q: he residual theory of dividends argues that dividends a. can only be distributed if there is income…

A: Solution:- Residual theory of dividends means the dividend is the residue left after meeting the…

Q: Which one of the following statements is correct if the pecking order theory holds? a. Firms with…

A: According to the pecking order theory, managers prefer to fund investment options using the firm's…

Q: The existence of asymmetric (insider) information makes it desirable for firms to:…

A: The term Asymmetric Information means the unbalanced information between the two parties in a…

Q: Holding assets constant, if debt increases, A. The firms ROA declines B. The firms net income would…

A: Introduction:- An asset is any resource that a corporation or economic organization possesses or has…

Q: Explain the effect of D/E on asset returns, equity returns (assuming that cost of debt is not…

A: Three main actors of production namely land, labor and capital are given primary importance. Capital…

Q: which one is correct please confirm? QUESTION 21 Finance researcher Myron Gordon argues that ____.…

A: According to Myron Gordon a company’s stock is worth sum of all its future dividend’s present value.…

Q: Which one of the following statements related to the Security Market Line approach to equity…

A: "The model is dependent upon a reliable estimate of the market risk premium". Since the equity is…

Q: Even if no share of stock issues of bond are sold, a firm still incurs a cost of internall equity or…

A: Variable cost is the cost incurred for per unit produced, whereas fixed cost is independent of units…

Q: Barton Industries expects next year's annual dividend, D1, to be $1.70 and it expects dividends to…

A: Meaning of flotation cost -  flotation cost are the costs incurred by a company at the time of…

Q: A working capital financing policy that finances almost all assets with long-term capital     a.…

A: Working capital is the difference between current assets and current liabilities.…

Q: If a firm wishes to retain the same return on equity when its net profit margin and total asset…

A: Net profit margin is given by profit divided by sales.So decline indicates that net income is…

Q: The dividend ____ states that investors will tend to be attracted to firms that have dividend…

A: The dividend "CLIENTELE EFFECT" states that investors will tend to be attracted to firms that have…

Q: Which of the following statements is​ FALSE? A. Equity cost of capital is normally higher then…

A: The Modigliani Miller propositions: In their paper on Capital Structure, Modigliani and Miller (MM)…

Q: Which of the following is a criticism of a policy of maximizing the firm’s return on equity (ROE)?…

A: The question is based on the concept return on equity (ROE) ROE is a part of ratio analysis to find…

Q: The Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock, flotation costs…

A: The computation of the flotation cost adjustment as follows: The formula used for the above table…

Q: The pecking order theory of capital structure suggests that managers will choose to utilise retained…

A: Pecking Order theory is an important theory in finance. It tells that the for funding purposes…

Q: If a firm increases its leverage, which extended Du Pont equation ratio is directly affected?

A: Du Pont Equation: The DuPont analysis is a structure for examining fundamental performance spread by…

Q: Which of the following statements is correct?(a) The quickest way to determine whether the firmhas…

A: a) Time interest earned ratio is a ratio that is calculated that shows an indication about the…

Q: A company will prefer debt in its capital structure, if (tick the most appropriate alternative) (a)…

A: Any capital structure is composed of debt and equity. Both have their own pros and cons which affect…

Q: Which one of the following is minimized when the value of the firm is maximized? A- WACC B- Return…

A: To maximize the value of the firm, it is important to have a fair cash flow for the firm. Value of…

Q: the cost of debt is cheaper than the cost of equity. Does it imply that a firm should increase its…

A: Answer: Introduction: If a corporation raises capital through issuing debt securities like bonds it…

Q: What is the blend of long-term financial sources used to finance the firm which may include debt,…

A: Explanation: The blend of long term financial resources that is used to finance the firm may include…

Q: (14-4) One position expressed in the financial literature is that firms set their dividends as a…

A: Residual dividend policy: A business with a residual dividend policy embraces zero abundance money…

Q: Under which condition an external equity financing can be advantageous? Group of answer choices…

A: Raising funds via external equity means raising funds via equity share capital to finance the assets…

Q: A firm will have a financing _________ whenever projected assets are greater than projected…

A: When projected assets is more than projected liabilities and equity, the is shortage of funds for…

Q: Which of the following is correct   a. In a leveraged recapitalization, a firm uses its excess…

A: Leveraged Buyouts  is the process of buying another company using money from outside sources, such…

Q: Assume that Modigliani-Miller Propositions 1 and 2 hold. Ex- plain carefully why the conclusion of…

A: The Modigliani-Miller theorem (MM) states that the market value of a company is calculated by its…

Q: Which of the following statements are not true Select one: a. Profitability Index is a discounted…

A: Introduction: All the above statements relate to capital budgeting, which involves making decisions…

Q: An analyst values a levered firm by discounting operating free cash flows (OFCF) by the WACC after…

A: Given: EV is the enterprise value E is the Market value of equity OFCF is the Operating free cash…

Q: The cost of a firmʹs equity Group of answer choices a. is independent of the firmʹs capital…

A: Weighted average cost of equity includes both equity and debt.

Q: The higher the firm's flotation cost for new common equity, the more likely the firm is to use…

A: Flotation costs is defined as the costs, which are usually incurred through the publicly traded…

Q: Identify the corect statement: O H EBIT is expected to be below the indifference point, the firm…

A: EBIT - EPS indifferent point is the EBIT level at which EPS is same

Q: WoeBeTide's chief objective is to meet its investment needs and maintain its target debt-equity…

A: Residual dividend theory suggest that the dividend paid by firm should be viewed as residual. The…

Q: One position expressed in the financial literature is that firms set their dividends as aresidual…

A: A residual dividend policy is one where a company uses residual equity to fund dividend payments.…

Q: articipate in the ownership of the firm. (b) Investors in debt are paid interest. (c) Debt is more…

A: Debt capital consists of the securities that represent lenders or financial creditors to the firm.…

Q: A company that is leveraged is one that O a. contains debt financing so as to increase the return on…

A: SOLUTION- MEANING OF LEVERAGE- IT REFERS THE USE  OF DEBT BY THE COMPANY TO FUND ITS OPERATIONS AND…

Q: What is the advantage of an ETF relative to open-end and closed-end investment company? ____ A)…

A: ETF has quite advantages over open ended and closed ended investment company.

Q: Which of the following statement is true? ( a. In brokered markets, buyers and sellers confront each…

A: The stock market is a platform where shares/securities are exchanged amount buyers and sellers. The…

Q: Is the debt level that maximizes a firm's expected EPS the same as the one that maximizes its stock…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The risk-return trade-off in managing a firm's working capital involves a trade-off between the…

A: Working capital = Current assets - current liabilities

Q: The residual theory of dividends argues that dividends * A O are necessary and important to maintain…

A: Dividend: It is the distribution of profits by an organization to its shareholders. When a company…

Q: Dividend changes may be used by management as a credible communication tool to signal investors…

A: A perfect capital market is the one where there are no arbitrage opportunities are present.