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- How is liquidity both beneficial and harmful to a firm?1. what is the efficient market hypothesis. What does it say, if any, about individual financialbehavior? 2. Differentiate between fundamental and technicalanomalies.Q.Briefly explain the over-investment problem from the perspective of the agency costs between debtholders and equity holders.
- Explain the following statement: The optimal financial policy depends in an important way on the nature of the firm's assets?what is IPO underpricing? How do asymmetric information model explain this phenomena?Briefly explainIs it better to finance a company thru debt or thru equity? Why? What are the downside and upside to each?
- ТOPIC: Q1. Based on the work of MM Propositions, why are levered firms usually more valuable than an otherwise identical unlevered firm? Q2. How does shareholder value relate to capital structure?What are the different financial risks in business acquisition and combination?Which of the following is NOT one of the three things financial markets and institutions enable households, firms, and governments to do? A. invest in capital B. eliminate risks C. smooth consumption expenditures D. trade risk
- How should (a) signaling and (b) the clienteleeffect be taken into account by a firm as it considers its dividend decision? Do signaling and clientele effects make it easier or harder to determineif investors prefer high or low payout ratios? Dothese factors influence the desirability of a stabledistribution policy versus one that is flexible andthus varies with the company’s cash flows andinvestment opportunities?7.) Describe the debt and equity markets? How do organizations obtain financing from each market? What are the costs involved with obtaining financing in each market? What are some considerations a entity might consider before choosing which market to raise capital?)How would you relate information asymmetry to firm’s dividend policy?