1. The objective in corporate finance is to maximize firm value. In practice, this is often narrowed down to maximizing the stock prices, for publicly traded firms. For the two objectives to be equivalent, which of the following assumptions do you need to make?

A. None of the options

B. Financial markets are efficient and rational

C. Bondholders / Lenders interests are fully protected

D. Information about the firm is provided both timely and unbiased.

E. All of the options

2. LMN Corporation, a real estate corporation, is planning to pay a dividend of $0.50 per share. Most of the investors in LMN corporation are other corporations, who pay 40% of their ordinary income and 28% of their capital gains as taxes. However, they are allowed to exempt 85% of the dividends they receive from taxes. Under the classic tax system, if the shares are selling at $10 per share, how much would you expect the stock price to drop on the ex-dividend day?

	A.	$1.00
	B.	$0.65
	C.	$0.45
	D.	$0.50