In perfect world capital market

Assignment Help Financial Management

Reference no: EM131070675

In a "perfect world" capital market, how important is a firm’s decision to pay dividends versus repurchase shares? Under what conditions would you have a tax preference for share repurchase rather than dividends? Would managers acting in the interests of long-term shareholders be more likely to repurchase shares if they believed the stock to be either undervalued or overvalued? Lastly, explain how you would respond to firm’s decision to cut its dividend

Reference no: EM131070675

Questions Cloud

Expected return on equally weighted portfolio of these stock : Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .64 .10 .18 .36 Bust .36 .10 .04 −.07 a. What is the expected return on an equally weighted portfolio of ..

Fixed costs increase before accounting profits turn negative : A project currently generates sales of $12 million, variable costs equal to 60% of sales, and fixed costs of $2 million. The firm’s tax rate is 50%. The project will last for 10 years. The discount rate is 12%. What is the effect on project NPV, if s..

Dividend discount model and discounted cash flow model : You have been asked to perform a stock valuation prior to the annual shareholders meeting next week. The two models you’ve selected to value the firm are 1) the dividend discount model and 2) the discounted cash flow model.

In perfect world capital market : In a "perfect world" capital market, how important is a firm’s decision to pay dividends versus repurchase shares? Under what conditions would you have a tax preference for share repurchase rather than dividends?

What will be accounting and NPV break-even levels of sales : Modern Artifacts can produce keepsakes that will be sold for $80 each. Nondepreciation fixed costs are $1,100 per year and variable costs are $60 per unit. What will be the accounting and NPV break-even levels of sales, if the firm's tax rate is 40%?

Beneficial interest in transferred receivables equal : In December 2016, Bay Watch Company factored accounts receivable that had a book value of $500,000 to Spirit Bank, with recourse and estimates the fair value of the recourse obligation to be $10,000. Under this arrangement, Klein provides Bay Watch w..

What is project NPV in the worst-case scenario : However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10% higher or 10% lower than the initial estimate. What is project NPV in the “best-case scenario,” that is, assuming all v..

What is the NPV break-even level of sales assuming tax rate : Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $120. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $212,000. Wh..

User Account

All Pages