- 6 Marks
AFM – Nov 2016 – L3 – Q1a – The role and responsibility of senior financial executive/advisor | Financial strategy formulation
Discuss the interrelation between investment, financing, and dividend policies and their effect on firm value.
Question
When determining the financial objectives of a company, it is necessary to take three types of policy decisions into account: investment policy, financing policy, and dividend policy.
Required:
Discuss the nature of these three types of decisions, commenting on how they are interrelated and how they might affect the value of the firm (i.e., the present value of projected cash flows).
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