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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.
Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose
Five years ago, you bought a house for $151,000, with a down payment of $30,000, which meant you took out a loan for $121,000. Your interest rate was 5.75% fixed. You would like to
What are the Types of orders (i) Spot Delivery: Spot delivery means delivery and payment on the same day as date of the contract or on the next day. (ii) Hand Delivery:
The following information pertains to Fairways Driving Range, Inc.: The company is considering operating a new driving range facility in Sanford, FL. In order to do so, they will
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LOMBARD COMPANY
Methods or Techniques of Financial Forecasting 1. Use of Cash Budgets A cash budget is a financial statement showing as: a) Sources of capital and revenue cash inflows
A company that manufactures electrical appliances is looking at one of its lines (washing machines), where it offers three different levels of specification: Basic which sells for
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