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Modigliani-Miller, distributions, payout policy, planning, forecasting

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Short answer questions:

Explain the Modigliani-Miller dividend irrelevance proposition.

Discuss the different ways in which a corporation can distribute cash to its shareholders.

Elaborate on signaling with payout policy.

Discuss the importance and goals of long-term financial planning. Elaborate on the advantages and disadvantages of different methods of forecasting.

Discuss the concept of sustainable growth rate and its importance in financial analysis.

Discuss how the forecasted indicators could be used in financial analysis.

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Solution Summary

An explanation of the Modigliani-Miller dividend irrelevance proposition is examined.

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FORECASTING, LONG TERM FINANCING, AND OTHER FINANCE CONCEPTS

Modigliani-Miller Dividend Irrelevance Proposition.
This proposition argues that the appearance of a relationship between dividend policy and stock price may be an illusion. This proposition rests under the assumptions that: investment and borrowing decisions have already been made, and that these decisions cannot be altered by a dividend payment. This is equivalent to saying that the capital structure can no longer be affected by dividend decisions. Another assumption is that perfect capital markets exist; which means that adequate information about the firm exists and that there is no conflict of interest between the management and stockholders (Keown, 2002).

Different ways in which a corporation can distribute cash to its shareholders
1. Distributing ...

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  • Master in Business Administration, Saint Mary's University
  • Doctor of Philosophy in Education, University of the Philippines
  • Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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