Question: Question 4 a) Explain how share buybacks and cash dividends can in theory be exactly equivalent for both a company and its shareholders. (15 marks)

Question 4

a) Explain how share buybacks and cash dividends can in theory be exactly equivalent for both a company and its shareholders. (15 marks)

b) Explain why in practice a firm or shareholder may prefer one over the other.

(10 marks)

c) Describe what is meant by financial slack and how is it of relevance to managers and investors?

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