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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

Give two reasons stockholders might be indifferent between owning the stock of a firm with volatile cash flows and the stock of a firm with stable cash flows.

Summary Introduction

To discuss: The reasons for stockholders will be indifferent between owing the firm’s stock with volatile cash flows and stocks with stable cash flows.

Introduction:

Stock is a type of security in a company that denotes ownership. Every company can raise the capital by way of issuing stocks.

Explanation

The reasons for stockholders will be indifferent between owing the firm’s stock with volatile cash flows and stocks with stable cash flows are as follows:

At the time when the firm, removes the volatile cash flows by means of risk management techniques cannot change the expected future cash flows and weighted average cost of capital (WACC)...

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