Refer to the first balance sheet prepared for Rational Demiconductor in Section 16-5. Again it uses cash to pay a $1,000 cash dividend, planning to issue stock to recover the cash required for investment. But this time catastrophe hits before the stock can be issued. A new pollution control regulation increases manufacturing costs to the extent that the value of Rational Demiconductor’s existing business is cut in half, to $4,500. The NPV of the new investment opportunity is unaffected, however. Show that dividend policy is still irrelevant.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.