Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Project Management Expert

Instructions

1. Answer all problems:

problem 1  

a) Managing directors of three profitable listed companies discussed their companies’ dividend policies at the business lunch.

Company A; has deliberately paid no dividends for the last five years.
Company B; always pays a dividend of 50% of earnings after taxation.
Company C; maintains a low but constant dividend per share (after adjusting for general price index), and offers regular scrip issues and shareholder concessions.

Every managing director is convinced that his company’s policy is maximizing shareholders wealth.

Required

describe the advantages and disadvantages of alternative dividend policies of the three companies? Discuss the situation under which every managing director may be correct in his belief that his company’s dividend policy is maximizing shareholders wealth. Declare clearly any assumptions you make.

b) Discuss briefly five sources of external finance which a medium-sized company may use to finance its export sales.

problem 2

The management of Nelson plc wish to estimate their firm’s equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it will be unsuitable to estimate beta from actual share price behaviour over such a short period. Instead it is proposed to ascertain, and where essential adjust, the observed equity betas of other companies operating in the similar industry, and with the same operating characteristics as Nelson, as these must be based on same levels of systematic risk and be capable of providing an accurate estimate of Nelson’s beta

Three companies have been identified as firms having operations in the same industry as Nelson with identical operating characteristics. Though, only one company, Oak plc, operates exclusively in the similar industry as Nelson. The other two companies have some dissimilar activities or opportunities in additional to those which are the same as those of Nelson.

Details of the three companies are as follows;

a. Oak plc has an observed equity beta of 1.12. The capital structure at market value is 60% equity, 40% debt.

b. Beech plc has an observed equity beta of 1.11. It is estimated that 30% of the present market value of Beech is caused by risky growth opportunities that have an estimated beta of 1.9. The growth opportunities are reflected in the observed beta. Beech’s other activities are the same as Nelson’s. Beech is financed entirely by equity.

c. Pine plc has an observed equity beta of 1.14. Pine has two divisions, East and West. East’s operating characteristics are considered to be identical to those of Nelson. The operating characteristics of West are considered to be 50% more risky than those of East. In terms of financial valuation East is estimated as being twice as valuable as west. The capital structure of Pine at market values is 75% debt, 25% debt.
Nelson is financed by equity. The tax rate is 40%.

Required

a. Suppose all debt is virtually risk-free, make three estimate of the equity beta of Nelson plc. The three estimates should be based, separately, on the information provided for Oak, Beech and Pine.

b. Describe why the estimated beta of Nelson, when eventually determined from observed share price movements, may differ from the value derived from the approach in (a) above.

c. State the reason why a company has a very volatile share price and is generally considered to be extremely risky could have a lower beta value, and hence lower financial risk, than an equally geared firm whose share price is much less volatile.

Project Management, Management Studies

  • Category:- Project Management
  • Reference No.:- M91430

Have any Question? 


Related Questions in Project Management

Assignment systems design project instructionsfor your

Assignment: SYSTEMS DESIGN PROJECT INSTRUCTIONS For your final assignment in this course, you will create a project using the requirements outlined below. You may use your own place of business (preferred) or an existing ...

1 how is the resolution of a printer comparable to the

1. How is the resolution of a printer comparable to the resolution of a screen? 2. How does a CD differ from a floppy disk? 3. What are three types of flash memory cards? 4. What is a mobile CPU? Which wireless standard ...

Project management assignment1 the following table shows

Project Management Assignment 1) The following table shows the allocation of work assignments and resources needed for an investment firm to make a decision on investing in company XYZ.   Task A Task B Task C Prtfolio Ma ...

Choose a piece of writing from a profession you are

Choose a piece of writing from a profession you are unfamiliar with. For example, if you are studying biology, choose an excerpt from a book on fashion design. Identify several terms you are unfamiliar with, terms that m ...

Two long cylinders of radii r1nbsp 10 mm and r2nbsp 13 mm

Two long cylinders of radii R 1  = 10 mm and R 2  = 13 mm, in frictionless contact with their axes parallel to each other, are pressed together with a force per unit length, F = 3,200 N/mm. Determine the semi-contact len ...

Assignment project team and stakeholder management -

Assignment: Project Team and Stakeholder Management - Essay Read the project case for this assignment. As the project manager for the District 4 Warehouse Move project, you will need to determine who your stakeholders an ...

In your judgment is intel a monopolydid intel use

In your judgment is Intel a "monopoly"? Did Intel use monopoly-like power; in other words, did Intel achieve its objectives by relying on power that it had due to its control of a large portion of the market?

What distinguishes hypotheses from laws when does a

What distinguishes hypotheses from laws? When does a hypothesis become a law? Are the following rules hypotheses or laws and why: Newton, Coulomb, Ampere, Planck, de Broglie, Bohr atom, tunneling, Fermi distribution, Bos ...

Discussionagile schedule development gradedas we have seen

DISCUSSION Agile Schedule Development (graded) As we have seen, traditional and Agile schedule developments are quite different. Agile project management was originally developed to do software development. Could a tradi ...

Consider an e-business like amazoncom which web-centric

Consider an e-business like Amazon.com. Which Web-centric metrics on page 208 would be most important to it? Justify your answers. Now consider a content provider like CNN ( www.cnn.com). Which Web-centric metrics would ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro