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

Connectix inc recently issued noncallable bonds that mature

Connectix Inc. recently issued noncallable bonds that mature in 10 years. They have a par value of $1,000 and an annual coupon of 7.5%. If the current market interest rate is 7.7%, at what price should the bonds sell?

Generate code for the following three-address statements

Generate code for the following three-address statements assuming stack allocation where register SP points to the top of the stack.

Budgetary process1 why is an audit considered to be the

Budgetary process 1. Why is an audit considered to be the final phase of a budgetary process? 2. What organizations undertake governmental program evaluations, and why do they do it? 3. Are program evaluations more likel ...

A project has an initial cash outflow of 39800 and produces

A project has an initial cash outflow of $39,800 and produces cash inflows of $18,304, $19,516, and $14,280 for years 1 through 3, respectively. What is the NPV at a discount rate of 11 percent?

Mayas incs optimal cash transfer amount using the baumol

Maya's Inc.'s optimal cash transfer amount, using the Baumol model, is $55,385. The firm's fixed cost per cash transfer of marketable securities to cash is $180. In addition, the total estimated cash costs (transfers and ...

Graph the means in figure 914 for the interaction between

Graph the means in Figure 9.14 for the interaction between self-esteem and ego threat. Does the graph look like one in which an interaction is present? Why or why not?

When the adjustable mirror on the michelson interferometer

When the adjustable mirror on the Michelson Interferometer is moved 20 wavelengths, how many fringe pattern shifts would be counted?

Your customer has a yoga studio when she started the

Your customer has a Yoga Studio. When she started the business, she got a loan for $5,000 to equip the studio. Interest is $75 per month and depreciation on the furnishing is $50 per month. She pays $1,000 per month in r ...

What would be the cumulative scatter of the four variables

What would be the cumulative scatter of the four variables we used in the Figures 17.2 through 17.7 if we combined them arithmetically? How does this compare with the scatter computed in the text using the square root of ...

1 outline the differences between npv irr and pi what are

1. Outline the differences between NPV, IRR, and PI. What are the advantages and disadvantages of each technique? Do they agree with regard to simple accept or reject decisions? 2. Under what circumstances will the NPV, ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen