a) Is there an easily identifiable debt-equity ratio that will maximize the value of the firm? Why or why not?
b) What is the basic goal of financial management regarding capital structure?
c) It is sometimes suggested that firms should follow a “residual”
dividend policy. With such a policy, the main idea is that a firm should
focus on meeting its investment needs and maintaining its desired
debt–equity ratio. Having done so, any leftover, or residual income is
paid out as dividends. What do you think would be the chief drawback to a
residual dividend policy?