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Erin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) dividend irrelevance theory. Based on your understanding of MM's arguement and the impact fo the assumptions applied to the arguement, fill in the missing parts of their conversation.
Erin: Modigliani and Miller (MM) divident irrelevance theory is based on several assumptions, however, in the real world these assumptions do not apply.
Mia: Issuance or flotation costs impact divident policy decisions, and companies do not care about whether to retain earnings or distribute dividends.
Erin: You are right Mia. Due to the issuance costs with new equity sales, companies tend to make (earnings retention or dividend payout) more desirable.
Mia: If a company pays out dividends and needs funds to invest in profitable projects, it would need to generate capital through new stock issues which is (more or less) expensive than using internal cash flow.
XYZ Company spent $750,000 to develop a microchip. The company spent an additional $200,000 for marketing. XYZ Company can manufacture the chip for $205 each in variable costs. What is the payback period of the project? What is the profitability inde..
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McDowell Industries sells on terms of 3/10, net 25. Total sales for the year are $1,561,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 74 days after their purchases. Assume 365 days in year for ..
What happens to the return if the investor pays more or less than the amount calculated?
Suppose Mick's is projecting a 20% increase in sales for the coming year, and that cost of goods sold and all expenses remain a constant percentage of sales. Also assume that the amount of depreciation and interest paid and the firm's tax rate (35%) ..
Which do you feel is the more important stakeholder of the Better Business Bureau, the business or the consumer? Assume the role of this stakeholder. What steps would you like to see the company take to ensure that you are protected and this ethical ..
Please list the endogenous and exogenous variables in the:
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation expense is called the:
What is? Avicorp's pre-tax cost of? debt? Note: Compute the effective annual return.
The drying rate in an industrial process is dependent on many factors and varies according to the following distribution. What is the average drying time for the 12 processes you simulated? Compute the mean drying time
______________ is when derivatives are used to try and make money by taking on risk. A swap is a method for reducing financial risk. Which of the following statements about swaps is not correct? Suppose you believe that Du Pont’s stock price is going..
You take out a $200,000 mortgage for 20 years at 6%. What is your monthly payment? What is the principle and interest on the first payment? What is the principle and interest on the twelfth payment? How much interest will you pay over the 20 years?
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