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Q. Describes the Gordons dividend model?
Gordon's Model: - Gordon's model is one more theory which contends that dividend policy is relevant for the value of the firm. Alternatively the dividend decision of the firm affects the value of the firm.
Assumptions:-
(i) No External Financing: - Gordon's model presumes that no external financing is available and retained earnings are the merely source of finance.
(ii) All-Equity Firm: - This model presumes that the firm is an all equity firm and it has absolutely no debt.
(iii) No Taxes: - Corporate taxes don't exist
(iv) Perpetual earnings: - it is presumed that the firm has perpetual life and their streams of earnings are also perpetual.
(v) Constant Internal Rate of Return: - An internal rate of return of the firm is presumed to be constant.
(vi) Constant Cost of Capital: - The cost of capital of the firm is presumed to be constant.
(vii) Constant Retention Ratio: - The retention ratio one time decided upon is constant.
(viii) Cost of capital in excess of growth rate: - It is presumed that the firm's cost of capital is greater than the growth rate.
IAS 14 "risk and return approach" Advantages Highlights the profitability, risk and returns of each segment. Information is more comparable with other entities.
Debt holders versus Shareholders A second agency problem arises because of potential conflict between stockholders and creditors. Creditors lend finances to the firm at rates w
Q. What do you mean by Hedge Fund? In the easiest strategy a hedge fund borrows Hong Kong dollars (HKD) and then sells them in the market against USD that is they short the HKD
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BFN1014 ASSIGNMENT 2 TRI 2 2012 2013
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