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

Name the industrywith this case a comparison is made

NAME THE INDUSTRY With this case, a comparison is made between three firms in different industries using net profit margin, total asset turnover and current ratio. 1. Apple Fiscal year 2010 ended September 25, 2010, and ...

Wat is the resilience of the bolts and joint this time

What is the resilience of the bolts and joint this time? What is the stiffness ratio of this eccentric joint? By how much does the tensile load of 7.40 kips increase the tension in the bolts and reduce the clamping force ...

Katherine wishes to endow a professorship in honor of her

Katherine wishes to endow a professorship in honor of her beloved mycology professor. The University's development office has prepared a proposal for her review, to wit, "The Agnew Chair in Fungus Studies," which will co ...

According to an article in the economist magazine in 1958

According to an article in the Economist magazine: In 1958 American onion farmers, blaming speculators for the volatility of their crops' prices, lobbied a congressman from Michigan named Gerald Ford to ban trading in on ...

Activity-based costing caterpillar comparison essay

Activity-Based Costing / Caterpillar comparison essay assignment After reading thoroughly the article entitled ‘Product Costing at Caterpillar' by Lou F. Jones from Management Accounting, February 1991, your assignment i ...

Abc corp produces and sells high-end entertainment systems

ABC Corp. produces and sells high-end entertainment systems. Its average selling price is currently $3,200 per system. Based on a review of its projected financial statements, the company's variable costs are $1,200 per ...

Assessment task 1- referencing style apa with in text

Assessment Task 1: - Referencing style: APA with in text referencing - Answer each questions with references and (formulas if required) - showing the right formulae to be used, the steps shown in arriving at the answers, ...

1 estimating the annuity amount amy and vince want to save

1. Estimating the Annuity Amount. Amy and Vince want to save $7,000 so that they can take a trip to Europe in four years. How much must they save each month to have the money they need if they can get 8% on their savings ...

1 distinguish between concurrent and predictive validity do

1. Distinguish between concurrent and predictive validity. Do these terms refer to types of construct validity or criterion-related validity? 2. How can we tell whether a particular measure is biased against a particular ...

Wilmas vegetable market had the following transactions

Wilma's Vegetable Market had the following transactions during 2012: 1. Issued $25,000 of par value common stock for cash. 2. Recorded and paid wages expense of $10,000. 3. Acquired land by issuing common stock of par va ...

  • 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