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Question:
a. Explain what the debt overhang problem is (following the lines of Myers 1977) make sure that you specify what the relevant conflict of interest is and what are the key necessary conditions for this problem to happen?
b. Explain the "asset substitution" effect. Again make sure that you clarify which agents are in conflict and the necessary conditions for the problem to happen.
Q. Compute the dividend policy and the value of the firm? Rate of Return: (i) 15% (ii) 10% (iii)8% Cost of Capital (Ke) = 10% Earning per share (E) = Rs. 10 C
How do risk-averse investors compensate for risk when they take on investment projects? For the reason of risk aversion, people demand elevated rates of return for taking on hi
Dividend cover Dividend cover = Profit available to ordinary shareholders (PAT) / Annual dividend(no. of times) Or = EPS/Dividend per share Dividend cover shows safety
Q. What is denoted by weighted average cost of capital OR Composite? How is it calculated? Exemplify with an example. Ans. Weighted Average Cost of Capital: - Capital formation
These securities are backed by income-producing real estate, usually in the form of warehouses, shopping centers, apartments, office buildings, senior housi
You know that Treasury bills have a beta of 0 because they are risk-free. A portfolio of technology stocks has a beta of 3. You plan to invest 40% of your investment capital in T
Q. Explain about Cash Flow Statement? Cash Flow Statement: - This is another process of cash management. A cash flow statement is the statement showing inflows as well as outfl
Internal capital rationing is used by firms for exercising financial control. How does a firm achieve this?
Assessment of in individual strengths and weaknesses Before finalizing career plan for an individual and placing him on career path, it is necessary to access his strengths and
Suppose that Harry and Steven make their living selling contraband at opposite ends of a town that is 1 mile long. Because it's a crowded city, the citizens use taxi-cabs for trans
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