Examlex
A beef processing firm is considering whether to upgrade its plant at a cost of $200,000 or invest in an account that earns 12% annual interest. If it upgrades its plant, the firm will generate an additional $70,000 of profit each year for the next three years. Should the firm upgrade its plant?
Dividend Irrelevance
Dividend irrelevance theory suggests that the dividend policy a company follows has no effect on the company’s stock price or its cost of capital.
Transaction Costs
Expenses incurred when buying or selling goods and services, which can include commissions, fees, the spread between buy/sell prices, and other related costs.
Floatation Costs
The total costs associated with a company issuing new stocks or bonds, including underwriting, legal, registration, and other expenses.
Dividend Irrelevance Theory
A theory proposed by Modigliani and Miller that suggests dividend policies do not affect a company’s capital structure or stock price in a perfect market.
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