Question 1: What policies and payments does a firm's dividend policy consist of? Why is determining dividend policy more difficult today than in past decades?
Payments can be in the form of cash, or stock
Question 2: Why is the debt level that maximizes a firm's EPS generally higher than the debt level that maximizes its stock price? The more leverage the company has allows them to produce more to boost earnings
Question 3: A utility company is supposed to be allowed charge prices high enough to cover all costs, including the cost of capital. PUC's are supposed to take actions to stimulate companies to operate efficiently. A particular utilities debt ratio was 33%. Some argued that a higher debt ratio would lower the firms cost of capital and permit it to charge lower rates. Can the optimal debt ratio be determined- discuss pros and cons?