a) Annual payment of cash dividend does not have any effect on the market capitalisation of equity shares. The most important factor here is the ability of the business to generate future cashflows through the earnings per share (EPS) Critically discuss the validity, or lack thereof, of this statement.

b) JB plc currently has in issue, debenture with face value of 100 each which carries a coupon rate of 8% payable on annual basis. Assume that the debenture is redeemable in 12 years time with a yield to maturity of 5% Required:

i. Calculate the current value of the debenture in of JB plc.

ii.If the actual market price is 156.59 what advice would you give to an investor in this bond