How do dividend payments serve to reduce agency costs between corporate managers and external investors? under what circumstances might a firm borrow money to make its dividend payments?
You have been watching Easy Electronic shares carefully for the last three years. Two months ago the company announced a dividend reduction from RM0.30 per quarter to RM0.20 per quarter. On the very next ex - dividend date, the stock price fell by RM0.12. There is no capital gains tax.
- Interpret this price change given all investors face a tax rate of 0 percent on dividend.
- Interpret this price change given all investors face a tax rate of 30 percent on dividend.
If the market has an expected return of 12 percent and a standard deviation of 26 percent, and the risk - free rate is 5 percent, explain how you can construct a portfolio with an expected return of 20 percent. what will be the standard deviation of this portfolio?
source: Corporate Finance First Semester Examination Academic Session 2011/2012, Master of Business Administration, Universiti Sains malaysia
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