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Bird-in-hand Theory
Advanced via John Leitner in year 1962 and furthered with Myron Gordon in year 1963. Argues such shareholders are risk averse and prefer specific. Dividends payments are more specific than capital gains that rely on supply and demand forces to determine share prices.
Hence, one bird in hand as certain dividends is better than two birds in the bush as uncertain capital gains. Consequently, a firm paying high dividends or certainly will have higher value as shareholders will require using lower discounting rate.MM argued against the above proposition. They argued such the required rate of return is independent of dividend policy. They kept such an investor can realize capital gains created by reinvestment of retained earnings, where they sell shares. If this is probably possible, investors would be indifferent between capital gains and cash dividends.
Explain the term - Underwriting Underwriting is an agreement whereby underwriter promises to subscribe to a specified number of debentures or shares or a specified amount of
the nominal fee interest rate in your account is 7% your semi-annually rate of interest APY will be?
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A paper mill produces two grades of paper viz., X and Y. Because of raw material restrictions, it cannot produce more than 400 tons of grade X paper and 300 tons of grade Y paper i
Analysis of the bond issue (a) Show that the price of the bond is equal to that of a portfolio which contains i) a long position in an option-free but otherwise identical co
Important points for Working Capital Cycle A lengthy working capital cycle is a sign of poor management of debtors and stock reflecting low turnover of debtors and stock and l
Attached is the file for your bond problem. Your group must use the following for the bond problem. In addition, using the general ledger software as described in the project i
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Shareholders Expectation and Growth Stage Growth Stage Dividend policy is likely to be influenced with firm's growth stage as like a young rapidly growing firm is probabl
Restrictive Bond or Debt Covenant In this case the debenture holders will impose strict conditions and terms on the borrower. These restrictions may comprise: a) No disposal
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