Problem 1:
Every time the listed company does a share buyback, media and investors alike would debate fiercely on merits of such a scheme. There are investors who prefer buybacks to high dividends payments and vice versa. Proponents of both schemes position themselves to share price raises as their proof that such schemes raise shareholder value.
Required:
Illustrate out whether shareholders’ value is improved not by a change in financial structure or dividend policies but by the more fundamental factor based upon information asymmetry. Support your argument with the empirical evidences.
Problem 2:
Unfortunately, the concept of risk is not the simple concept in finance. There are numerous different kinds of risks identified and some kinds are relatively more or relatively less significant in different conditions and applications. In some theoretical models of economic or financial processes, for illustration, some kinds of risks or even all risks might be entirely eliminated. For the practitioner operating in real world, however, risk can never be completely eliminated. It is ever-present and should be identified and dealt with.
Required:
Illustrate out the many kinds of risks which exist from the point of view of practitioner operating in the real world.
Problem 3:
The Directors of Blue Plc are discussing the significance of dividend policy on the market value of their company. The Chairman considers that the dividend is significant and does affect the company’s market value. On the other hand Finance Director disagrees, saying that the dividend policy has no impact on company’s market value.
Required:
Make a report which fully elucidates both Directors’ views. Comprise appropriate empirical research to support both views.