A company belongs to the risk class for which the appropriate capitalization rate is 10%. It currently
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A company belongs to the risk class for which the appropriate capitalization rate is 10%. It currently has 25,000 shares outstanding selling at Rs. 100 each. The firm is contemplating the declaration of dividend of Rs. 5 per share at the end of the current financial year. The company expects to have a net income of Rs. 2.5 lacs and a proposal for making new investments of Rs. 5 lacs.
Show that under MM assumptions the payment of dividend does not affect the value of the firm.
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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