Explain how excess cash might cause or worsen the agency, Financial Management

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Explain how excess cash might cause or worsen the agency

1. In your own word, Explain how excess cash might cause or worsen the agency problem.

2. Suppose the D and D Corporation has net income to common shareholders of $25,000,000, with 30 million common shares outstanding. A payout ratio of 65% remains in place. The dividend per share is:

3. Briefly explain what the Trade-Off Theory is. What is its implication for capital structure? How do you explain why different firms may choose different capital structure? Illustrate your point conceptually using both the APV and WACC method.

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Financial Management: Explain how excess cash might cause or worsen the agency

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