Answer Happy

Question 1:
Part A:
a. The value of a share of stock depends on dividends yet a
substantial percentage of the companies listed on leading stock
exchanges don’t pay dividends. However, investors are nonetheless
willing to buy shares in them. Clearly explain how this is
possible. (20 marks)
b. Explain the reasons why debt capital in a firm typically has
a lower cost of capital than does equity capital in the same firm.
Will debt capital in a firm always have a lower cost of capital
than equity capital in a different firm? Why or why not? (40
marks)
c. Discuss the benefits and risks to investors holding
fixed-income securities. (40 marks)
Part B:
a. Clearly explain the difference between horizontal,
vertical, and conglomerate merger and acquisition activity and
provide an example of each. (20 marks)
b. Critically discuss the reasons why mergers and acquisitions
occur. (50 marks)
c. Critically discuss whether, in general, mergers and
acquisitions are successful in practice. (30 marks)