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                  242                               Corporate Finance                      BRILLIANT’S


                  as more important than  anything else. They  {Z`{_VVm H$mo AÝ` go A{YH$ _hËdnyU© _mZVr h¡Ÿ& `h
                  may use part profits to pay dividends regu-  Ü`mZ Z aIVo hþE {H$ CZHo$ nmg n`m©á H$aÝQ> àm°{\$Q²>g h¡
                  larly, irrespective of whether they have enough  `m Zht, do {S>{dS>oÝS²>g Ho$ {Z`{_V ^wJVmZ Ho$ {cE nmQ>©
                  current profits or not. Regularity in dividends  àm°{\$Q²>g H$m Cn`moJ H$a gH$Vr h¡Ÿ& {S>{dS>oÝS²>g _| {Z`{_VVm
                  develops an investment attitude rather that a  eo`ahmoëS>g© Ho$ _Ü` ñnoŠ`yco{Q>d Ho$ ~Om` EH$ BZdoñQ>_oÝQ>
                  speculative one among shareholders.         E{Q>Q²>`yS> {dH${gV H$aVr h¡Ÿ&         

                                          DIVIDEND THEORIES / {S>{dS>|S> ϶moarO

                   Q.27. Describe the various models, regarding relevance and irrelevance of dividend.
                         {S>{dS>|S> H$s àmg§{JH$Vm VWm Aàmg§{JH$Vm Ho$ g§~§Y ‘| {d{^ÝZ ‘m°S>ëg H$m dU©Z H$s{OE&

                                                           OR
                         Explain the Modigliani and Miller (MM) hypothesis for corporate dividend policy.
                         H$m°nm}aoQ  {S>{dS>|S> nm°{bgr Ho$ {bE ‘mo{S>p½bEZr VWm {‘ba (MM) hm¶nmoWr{gg g‘PmB¶o&

                                                           OR
                         "According to Walter's Model the optimum payout ratio can be either zero or 100%."
                         Explain the circumstances when this is true.
                         ''dmëQ>a ‘m°S>b Ho$ AZwgma Am°pßQ>‘‘ noAmCQ> aoemo ¶m Vmo eyݶ ¶m 100% hmo gH$Vm h¡&'' n[apñW{V¶m| H$m
                         dU©Z H$s{OE O~ ¶h g˶ hmoVm h¡&
                      The  relationship  between  dividend  and   {S>{dS>oÝS> Ed§ eo`a H$s d¡ë`y Ho$ _Ü` gå~ÝY ñnï>
                  the value of the share is not clear. The financial  Zht h¡Ÿ& \$m`ZopÝe`c _¡ZoOa H$mo {d{^Þ {damoYr VËdm| H$mo
                  manager  must  understand  the  various  con-  g_PZm Mm{hE Omo H$ånZr H$s {S>{dS>oÝS> nm°{cgr H$mo à^m{dV
                  flicting factors which influence the dividend
                  policy of the company.                      H$aVo h¢Ÿ&
                      On the relationship between dividend and    {S>{dS>oÝS> Ed§ \$_© H$s d¡ë`y Ho$ _Ü` g§~§Y na {d{^Þ
                  the value of the firm, different theories have  Ï`mo[aO {dH${gV H$s JB©Ÿ& BZ Ï`mo[aO H$mo {ZåZ{c{IV Xmo
                  been developed. These theories can be grouped
                  into two categories:                        lo{U`m| _| g_m{hV {H$`m J`m:
                   (a) Theories  which  consider  dividend     (a) do Ï`mo[aO Omo \$_© H$s d¡ë`y à^m{dV H$aZo _| {S>{dS>oÝS>
                      decision to  be an  active variable  influe-  {S>grOZ H$mo EH$ EpŠQ>d do[aE~c _mZVr h¡Ÿ&
                      ncing the value of the firm.
                  (b) Theories  which  consider  dividend      (b) do  Ï`mo[aO  Omo  {S>{dS>oÝS>  {S>grOZ  H$mo  Ag§JV
                      decision to be irrelevant.                  _mZVr h¡Ÿ&

                  Dividend Relevance                          {S>{dS>oÝS> H$s àmg§{JH$Vm
                  (A) Walter Model                            (A) dmëQ>g© _m°S>c

                      Walter's model supports the doctrine that   dmëQ>g© _m°S>c Bg VÏ` H$mo gnmoQ>© H$aVm h¡ {H$
                  dividends  are relevant.  Professor   James  E.  {S>{dS>oÝS²>g àmg§{JH$ h¡Ÿ& àmo\o$ga Ooåg B©. dmëQ>a Zo `h
                  Walter argues that the choice of dividend policy  VH©$ {X`m {H$ {S>{dS>oÝS> nm°{cgr H$m M`Z \$_© H$s d¡ë`y H$mo
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