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?
Please discuss the questions in complete paragraphs.