Question 4 (Total 20 marks) a. Why according to dividend irrelevance argument, the firm value depends on only optimal in

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Question 4 Total 20 Marks A Why According To Dividend Irrelevance Argument The Firm Value Depends On Only Optimal In 1 (30.03 KiB) Viewed 34 times

Question 4 (Total 20 marks) a. Why according to dividend irrelevance argument, the firm value depends on only optimal investment policy and not on the dividend pay-out? What are the shortcomings of the dividend irrelevance theory? (10 marks) b. Carsley Plc currently paid $2.50 dividend per share. Next year's dividend is expected to be $3 per share. After next year, dividends are expected to increase at a 9 percent annual rate for three years and a 6 percent annual rate thereafter. Calculate the current value of a share of Carsley's stock to an investor who requires a 15 percent return on his or her investment. (10 marks) a