Q5. What is ‘informational content' of dividend payment? XYZ Ltd. currently has 1 lakh equity shares outstanding. Current market price per share is Rs. 20. The net income for the current year is Rs. 20 lakh and investment budget are Rs. 40 lakhs. Cost of equity is 10 %. The company is planning to declare dividend @ Rs. 8 per share. Assuming MM Approach: (i) Calculate market price per share if dividend is declared and if it is not declared. (ii) How many new equity shares are to be issued under both options? (iii) Show that the total market value of shares remains unaffected by the dividend decision. Q 6. Explain the short costs in relation to cash management.
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maximum 20 points only 5 points
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