What is the basis of the argument that transactions costs provide a reason for firms to pay dividends, and how has the steep decline in transactions costs in recent years affected this argument?
Answer to relevant QuestionsWhat does it mean to say that dividends are irrelevant in a world without taxes or other market frictions? A company decides to compete by making a major investment to modernize production facilities. Describe two ways in which meeting this objective might force a firm to sacrifice other objectives. What can be done to deal with uncertainty in the cash budgeting process? Why might an intra-month view of the firm’s cash flows cause a well-prepared cash budget to fail? What are the key elements of a firms credit terms? What is a key determinant of the credit terms offered by a firm? Why do a firms regular credit terms typically con-form to its industry’s standards? On what basis other than credit terms should the firm compete?
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