Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Task1. Theoretically Modigliani and Miller (1958) took a fairly straightforward view of purpose of a company in the economy. They pointed out which companies take cash from providers of long-term funds, invest it in new projects with positive Net Present Value (NPV) and repay the future net inflows to these fund providers in =form of dividend plus interest.

They showed that there is no relationship between debt and value of the firm and it seems to be good enough in the light of assumptions underlying their model. But, most of these assumptions are unrealistic and untenable.

Required:

problem1. Describe the validity of the Modigliani and Miller (1958) model in real world along with their assumptions.

Task2. “The agency theory concept was primarily formed by Berle and Means (1932), who argued that because of a continuous dilution of equity ownership of large corporations, ownership and control become more and more separated. This condition gives professional managers an opportunity to pursue their own interest instead of that of shareholders. Major effort of researchers has been devoted to models in which capital structure is verified by agency costs”.

Required:

problem1. Discuss in relation to the Agency problem by Jensen and Meckling (1976).

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M94609

Have any Question? 


Related Questions in Basic Finance

1 show that in the atsp formulation the connectivity

1. Show that, in the ATSP formulation, the connectivity constraints (6.61) and the subtour elimination constraints (6.62) are equivalent. 2. Show that the number of vertices of odd degree in a graph is even. 3. Let G = ( ...

Suppose you are comparing two companies that are in the

Suppose you are comparing two companies that are in the same line of business. Company C has an operating cycle of 40 days, and Company D has an operating cycle of 60 days. Company C has a current ratio of 3, and Company ...

An engineer at a pulp plant is considering the feasibility

An engineer at a pulp plant is considering the feasibility of sparging a waste gas stream containing a small concentration of chlorine gas into a chlorine-bleaching unit in order to augment the chlorine requirements for ...

Using the machine model of example 1012 find the minimum

Using the machine model of Example 10.12, find the minimum initiation interval and a uniform schedule for the iterations, for the following loop: Remember that the counting of iterations is handled by auto-increment of r ...

1 when did gnma come into existence what was its original

1. When did GNMA come into existence? What was its original function? What is its main function now? 2. What is a mortgage-related security? What are the similarities and differences between mortgage securities and corpo ...

1 oil and gas companies must disclose quantity estimates

1. Oil and gas companies must disclose quantity estimates for proved oil and gas reserves and the major factors causing changes in these resource estimates. Briefly indicate why this disclosure can be significant. 2. For ...

What are inventories briefly explain what happens to the

What are inventories? Briefly explain what happens to the level of inventories when aggregate expenditure is greater than real GDP, what happens when aggregate expenditure is less than real GDP, and what happens when agg ...

1nbspcalculate the cost of new common equity financing of

1. Calculate the cost of new common equity financing of stock R using Gordon Model Round the answers to two decimal places in percentage form (Write the percentage sign in the "units" box) Last Year Dividend Growth Rate ...

Discuss the differences between using 1 a terminal cap rate

Discuss the differences between using (1) a terminal cap rate and (2) an appreciation rate in property value when estimating reversion values.

Eat at my restaurant - cash flowwith this case we review

EAT AT MY RESTAURANT - CASH FLOW With this case, we review the cash flow of several restaurant companies. The restaurant companies reviewed and the year-end dates are as follows: 1. Yum Brands, Inc. December 25, 2010; De ...

  • 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