Part A) Strong form efficiency is a theoretical artifact that provides a (maximum / minimum) but unattainable level of market efficiency.

Strong form efficiency assumes that all information, including private (insider / outsider) information is reflected in prices and this is only possible if such information is actively traded upon by market participants as an accepted, common practice.

However, insider trading, which is the use of private/insider information to trade is (legal / illegal).

So, while cases of insider trading do occur, the illegality of it implies that it does not occur on a systemic scale for strong form efficiency to be a ( impractical / practical ) concept.

Part B) Identify whether the following statements are true or false:

1. Free cash flow can be retained, paid out or used to pay operating expenses. (Answer TRUE/FALSE)
2. Under MM assumptions, share buybacks is prefered over dividends. (Answer TRUE/FALSE)
3. Under MM assumptions, dividends is prefered over share buybacks. (Answer TRUE/FALSE)
4. Under MM assumptions, neither dividends nor share buybacks has a bigger impact on shareholder wealth. (Answer TRUE/FALSE)
5. Homemade dividends can be used offset a company dividend or share buyback. (Answer TRUE/FALSE)
6. A change in dividend payout provides no insight into the opinion of managers on future company performance. (Answer TRUE/FALSE)
7. An increase in dividends provides a negative price signal to investors. (Answer TRUE/FALSE)
8. In Australia, there is no difference between taxation on dividends and share buybacks.(Answer TRUE/FALSE)
9. In Australia, investors tend to prefer share buybacks to dividends.(Answer TRUE/FALSE)
10. Paying a dividend has no impact on capital structure. (Answer TRUE/FALSE)