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Stockholders Indifference with Volatile Cash Flows

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1. Give two reasons stockholders might be indifferent between owning the stock of a firm with volatile cash flows and that of a firm with stable cash flows.

2. Discuss some of the techniques available to reduce risk exposures.

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Solution Summary

The solution examines stockholders indifference with volatile cash flows. The techniques available to reduce risk exposure is determined.

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Question 1
Two of these reasons are:
1. The stock prices and hence the return to these stocks generally reflect the ...

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