Following is the data regarding two companies, Company-A and Company-B, belonging to the same risk class : Company-A Company-B Number of equity shares 1,00,000 2,00,000 Market price per share (₹) 15 7 10% Debentures (₹)
CS Professional · Financial, Treasury and Forex Management · PYQS · December 2014
Following is the data regarding two companies, Company-A and Company-B, belonging to the same risk class : Company-A Company-B Number of equity shares 1,00,000 2,00,000 Market price per share (₹) 15 7 10% Debentures (₹) 2,00,000 — Profit before interest (₹) 1,20,000 1,20,000 Dividend payout ratio is 100%. Explain how under Modigliani & Miller approach, Ramesh, an investor, holding 10% of shares in Company-A will be better off in switching his holding to Company-B.
Topics: Dividend Policy
Related Questions in this Topic
- Raj Limited had 50,000 equity shares of ₹10 each outstanding on January 1st. The shares are currently being quoted at pa...
- Comment on the following: A stable dividend policy is always preferable to fluctuating dividend policy.
- ABC Autos Ltd. started its business one year back with paid-up equity capital of ₹40 Lakh. Other details are as under: ...
- What are the main determinants of dividend policy?
- The Earning per share of a company is ₹16. The market capitalization rate applicable to the company is 12.5%. Retained e...