Dividend policy and cap structures

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Reference no: EM1337318

1. What is an event study designed to test?

2. What role does par value play in the pricing and sale of common stock by the issuing corporation? Why do most firms assign relatively low par values to their shares?

3. How does the signaling model of financial structure differ from the pecking-order model with respect to the assumption in this hypothesis of asymmetric information?

4. What is a firm's dividend yield? How does this compare to that firm's dividend payout ratio?

5. List and describe the three forms of informational efficiency. What is the implication for technical analysis under each of these forms?

6. What are some of the differences in U.S. bankruptcy laws and those in place internationally? What incentives do these differences provide for U.S. managers and for their peers in most other countries?

7. Which method would you use to evaluate an investment project that involved modernizing a firm's existing plant? The project will not affect the firm's target debt-to-equity ratio.

8. Why do firms with more-diverse shareholder bases typically pay higher dividends than private firms or public firms with more concentrated ownership structures? How are fixed dividends used as a bonding (commiment) mechanism by managers of firms with dispersed ownership structures and large amounts of free cash flow?

9. A CFO says that her firm chooses a capital structure that allows it to maintain a credit rating of AA. She reasons that a credit rating of AAA would be too conservative, but anything less than AA would be too risky. What capital structure model does this firm appear to follow?

Reference no: EM1337318

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