Question 1. Some companies have investment opportunities well in excess of the earnings available to finance them but they will still insist on paying dividends. Why?
Question 2. Rhere is evidence to suggest that dividends have a stable pattern than earnings. what reasons can you suggest for management adopting a policy of paying stable dividend in the face of fluctuating earnings?
Question 3. If increase dividends tend to be followed by (immediate) increase in share prices, how can it be said that dividend policy is irrelevant?
Question 4. What are the potential advantages and disadvantages to a company's shareholders of the company increase the proportion of debt in its capital structure?
Question 5. The cheif executive of ABC Ltd, ayoung company which has just set up a manufacturing operations, says;"We decided to borrow most of funds needed to establish our operations because high leverage would signal to markets that we were conand fully committed ti making this business succeed'. Evalaute this strategy, assuming that Planets manufacture:
(a) computers;
(b) household detergents