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MMPC 14

Investors exhibit three fundamental risk preference behaviours; risk aversion, risk in difference, and risk seeking

To analyze the risk preference behaviors of retail investors, we can consider two hypothetical investors, Investor A and Investor B, representing different risk preferences. Investor A: Risk-Averse Characteristics: Investing Strategy: Example: Investor A may invest heavily in a diversified bond fund, preferring the predictable returns and lower risk of bonds over the potential high returns… Read More »Investors exhibit three fundamental risk preference behaviours; risk aversion, risk in difference, and risk seeking

What do you mean by ‘Corporate Restructuring’? Why do firms go for it? Discuss the different modes of Corporate Restructuring

Corporate Restructuring refers to the process of reorganizing a company’s structure, operations, or financial arrangements to improve efficiency, reduce costs, or adapt to changing market conditions. This can involve changes in management, financial structure, operational practices, or ownership. Reasons for Corporate Restructuring Different Modes of Corporate Restructuring Conclusion Corporate restructuring is a strategic tool that… Read More »What do you mean by ‘Corporate Restructuring’? Why do firms go for it? Discuss the different modes of Corporate Restructuring

In case of a normal Firm where, r=k, which type of Dividend Policy the firm should follow? Identify the above dividend policy model and explain the model in detail

In the case of a normal firm where the return on equity (r) is equal to the cost of equity (k), the firm should follow the Dividend Irrelevance Theory, specifically referring to the Modigliani-Miller Dividend Policy Model. According to this theory, the firm’s value is unaffected by its dividend policy under certain assumptions. Modigliani-Miller Dividend… Read More »In case of a normal Firm where, r=k, which type of Dividend Policy the firm should follow? Identify the above dividend policy model and explain the model in detail

What is Financial Leverage and why is it called ‘Trading on Equity’? Explain the effect of Financial Leverage on EPS with the help of an example

Financial Leverage refers to the use of borrowed funds (debt) to finance investments, with the aim of increasing the potential return on equity (ROE). By utilizing debt, a company can amplify its earnings, as long as the returns generated from the borrowed funds exceed the cost of the debt. Why is it Called ‘Trading on… Read More »What is Financial Leverage and why is it called ‘Trading on Equity’? Explain the effect of Financial Leverage on EPS with the help of an example