The document summarizes the Modigliani-Miller theory of dividend policy. Some key points:
1) According to the theory, the value of a firm is based solely on its earnings and investment policy, not its dividend policy. Whether a firm retains earnings or pays dividends, the total return to shareholders is the same.
2) The theory is based on assumptions of perfect capital markets, no taxes, fixed investment policy, and no uncertainty.
3) Through mathematical proofs, the theory shows that dividends do not appear in the final equation determining a firm's value, indicating dividend policy is irrelevant to shareholders.
4) However, the theory is criticized for being based on unrealistic
This analysis is an important tool used to optimize the capital structure for highest earnings for shareholders
It helps in understanding the sensitivity of EPS at given level of Earning before Interest & Tax under different sources of financing
It helps in analyzing how capital structure decision is important to raise the value of firm
An optimal financing structure minimizes the cost of capital and maximizes the earnings
Earning Per Share under different Capital structure plans
Plan 1 ( Only Equity Shares )
EPS = (EBIT (1−Tax rate))/(No. of Outstanding Shares)
Plan 2 ( Equity Shares & Debt )
EPS = ((EBIT −Interest) (1−Tax rate))/(No. of Outstanding Shares)
Plan 3 (Equity, Debt & Preference Shares)
EPS = ((EBIT −Interest) (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
Plan 4 (Equity shares & Preference Shares)
EPS = (EBIT (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
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This analysis is an important tool used to optimize the capital structure for highest earnings for shareholders
It helps in understanding the sensitivity of EPS at given level of Earning before Interest & Tax under different sources of financing
It helps in analyzing how capital structure decision is important to raise the value of firm
An optimal financing structure minimizes the cost of capital and maximizes the earnings
Earning Per Share under different Capital structure plans
Plan 1 ( Only Equity Shares )
EPS = (EBIT (1−Tax rate))/(No. of Outstanding Shares)
Plan 2 ( Equity Shares & Debt )
EPS = ((EBIT −Interest) (1−Tax rate))/(No. of Outstanding Shares)
Plan 3 (Equity, Debt & Preference Shares)
EPS = ((EBIT −Interest) (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
Plan 4 (Equity shares & Preference Shares)
EPS = (EBIT (1−Tax rate)−Pref. Dividend)/(No. of Outstanding Shares)
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A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends are important for more than income generation: they also provide a way for investors to assess a company as an investment prospect. Dividend and market price of shares are interrelated. However, there are two schools of thought: while one school of thought opines that dividend has an impact on the value of the firm, another school argues that the amount of dividend paid has no effect on the valuation of firm.
The first school of thought refers to the Relevance of dividend while the other one relates to the Irrelevance of dividend.
Relevance includes: 1. Walter Valuation Model 2.GORDON’S MODEL.
Approaches to determine appropriate capital structure - EBIT-EPS Approch
anybody can join my google class (financial Mangement)
by entering class code : avkkvj5
Watch out full video on youtube-
https://youtu.be/Suf9NAMW6Jg
Net Operating Income Approach
It proposes that -
Capital structure does not matter in determining the value of firm
It suggests that the value of firm remains same and is not affected by the change in debt composition of financing
Increase in debt composition results in increased risk perception by investors
Thus, firm appears to be more risky with more debt as capital which results in higher required rate of return by investors
The weighted average cost of capital and market value of firm remains same with increased cost of equity
Assumptions -
There are only two sources of financing – Debt & Equity
Value of equity is calculated by deducting the value of debt from total value of firm
Value of firm is EBIT / Overall cost of capital
WACC remains constant and with an increase in debt, the cost of equity increases
Dividend payout ratio is 1
No taxes & No retained earning
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This presentation is made by Toran Lal Verma. Meaning, nature, and scope of Financial Management are discussed. scope and objectives of financial management have been discussed along with merits and demerits.
A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends are important for more than income generation: they also provide a way for investors to assess a company as an investment prospect. Dividend and market price of shares are interrelated. However, there are two schools of thought: while one school of thought opines that dividend has an impact on the value of the firm, another school argues that the amount of dividend paid has no effect on the valuation of firm.
The first school of thought refers to the Relevance of dividend while the other one relates to the Irrelevance of dividend.
Relevance includes: 1. Walter Valuation Model 2.GORDON’S MODEL.
Approaches to determine appropriate capital structure - EBIT-EPS Approch
anybody can join my google class (financial Mangement)
by entering class code : avkkvj5
Watch out full video on youtube-
https://youtu.be/Suf9NAMW6Jg
Net Operating Income Approach
It proposes that -
Capital structure does not matter in determining the value of firm
It suggests that the value of firm remains same and is not affected by the change in debt composition of financing
Increase in debt composition results in increased risk perception by investors
Thus, firm appears to be more risky with more debt as capital which results in higher required rate of return by investors
The weighted average cost of capital and market value of firm remains same with increased cost of equity
Assumptions -
There are only two sources of financing – Debt & Equity
Value of equity is calculated by deducting the value of debt from total value of firm
Value of firm is EBIT / Overall cost of capital
WACC remains constant and with an increase in debt, the cost of equity increases
Dividend payout ratio is 1
No taxes & No retained earning
Thank you for Watching
Subscribe to DevTech Finance
This presentation is made by Toran Lal Verma. Meaning, nature, and scope of Financial Management are discussed. scope and objectives of financial management have been discussed along with merits and demerits.
Dividend policy
What is Dividend?
What is dividend policy?
Theories of Dividend Policy
Relevant Theory
Walter’s Model
Gordon’s Model
Irrelevant Theory
M-M’s Approach
Traditional Approach
Referred to:
Prasanna Chandra
It's no secret that happy, satisfied employees are a key ingredient to a successful company. But what really motivates people? Traditional thinking follows that the more you pay someone the more loyal and satisfied they are in their job.
But, the truth behind employee motivation is a more complicated mix including praise, autonomy, and leadership opportunities.
Dividend Policy resolves two questions:
Question 1: Does dividend policy affect firm value?
Question 2: If so, What is the optimal level of distribution ratio i.e., % Net Income to be distributed as dividend (Payout ratio). These issues are discussed under Irrelevance Theories (Modigliani and Miller’s Model) and
Relevance Theories (Walter’s Model , Gordon’s Model)
In economics and accounting, the cost of capital is the cost of a company's funds, or, from an investor's point of view "the required rate of return on a portfolio company's existing securities". It is used to evaluate new projects of a company.
what is dividend policy
theory of dividend policy
dividend irrelevance theory
Modigliani and miller approach
MM formula
assumption
dividend relevant theory
Walters model
formula
assumption
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
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Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
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how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
3. Dividend
Theories
Relevance Theories
(i.e. which consider
dividend decision to be
relevant as it affects the
value of the firm)
Walter’s
Model
Gordon’s
Model
Irrelevance Theories
(i.e. which consider dividend
decision to be irrelevant as it
does not affects the value of
the firm)
Modigliani and
Miller’s Model
Traditional
Approach
4. According to this concept, investors do not pay any
importance to the dividend history of a company and thus,
dividends are irrelevant in calculating the valuation of a
company. This theory is in direct contrast to the ‘Dividend
Relevance’ theory which deems dividends to be important in
the valuation of a company.
Irrelevance Theory
6. Modigliani – Miller theory was proposed by Franco
Modigliani and Merton Miller in 1961. They were the pioneers in
suggesting that dividends and capital gains are equivalent when
an investor considers returns on investment.
The only thing that impacts the valuation of a company is
its earnings, which is a direct result of the company’s investment
policy and the future prospects.
7. Value of Firm (i.e. Wealth of Shareholders)
Firm’s Earnings
Firm’s Investment Policy and not on dividend policy
8. If a company retains earnings instead of giving it out as
dividends, the shareholder enjoy capital appreciation equal to
the amount of earnings retained.
If it distributes earnings by the way of dividends instead
of retaining it, shareholder enjoys dividends equal in value to
the amount by which his capital would have appreciated had
the company chosen to retain its earning.
Hence, the division of earnings between dividends and
retained earnings is IRRELEVANT from the point of view of
shareholders
9. Assumptions of the Model
Perfect Capital Markets: This theory believes in the existence of ‘perfect
capital markets’. It assumes that all the investors are rational, they have access to
free information, there are no floatation or transaction costs and no large
investor to influence the market price of the share.
No Taxes: There is no existence of taxes.
Fixed Investment Policy: The company does not change its existing
investment policy. This means that new investments that are financed through
retained earnings do not change the risk and the rate of required return of the
firm.
No Risk of Uncertainty: All the investors are certain about the future market
prices and the dividends.
10. Proof
Step 1
The market price of a share in the beginning of the period is equal
to the present value of dividends paid at the end of the period plus
the market price of shares at the end of the period. Symbolically,
P0= 1 ( D1+P1 )
(1 + ke)
Where P0= Prevailing market price of a share,
ke= Cost of equity capital
D1= Dividend to be received at the end of period 1 and
P1 = Market price of a share at the end of period 1.
11. Step 2
Assuming no external financing, the total capitalized value of the
firm would be simply the number of shares (n) times the price of
each share (P0). Thus,
nP0= 1 (nD1+nP1)
(1+ke)
Step 3
If the firm’s internal source of financing its investment
opportunities fall short of the funds required, and n is the number
of new shares issued at the end of the year 1 at price of P1 then
equation
nP0= 1 [(nD1+(n+∆n)P1-∆nP1)]
(1+ke)
12. Step 4
If the firm were to finance all investment proposals, the total amount
raised through new shares issued would be given in equation
∆nP1= I-(E-nD1)
∆nP1= I-E+nD1
∆ nP1= Amount obtained from the sale of new shares of finance capital
budget,
I= Total amount / Requirement of capital budget
E= Earnings of the firm during the period
nD1= total dividend paid out
E-nD1= Retained earnings
13. Step 5
If we substitute Eq4 into Eq3 we derive
nP0= 1 [nD1+(n+∆n)P1-(I-E+nD1)]
(1+ke)
Solving it
nP0=nD1+(n+∆n)P1-I+E-nD1
(1+Ke)
There is positive and negative nD1. so nD1 cancels. We then have
nP0=(n+ ∆ n)P1-I+E
(1+Ke)
Step 6 Conclusion
Since dividends are not in the final equation, MM concludes that dividends do
not count and that dividend policy has no effect on the share price.
14. Criticisms
No perfect Capital Market
Existence of Transaction Cost
Existence of Floatation Cost
Lack of Relevant Information
Differential rates of Taxes
No fixed investment Policy
Investor’s desire to obtain current income