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b) Bidii Limited has a cost of equity of 10%.The company currently has 250,000 shares outstanding and selling on the securities exchange at Kshs. 120
b) Bidii Limited has a cost of equity of 10%.The company currently has 250,000 shares outstanding and selling on the securities exchange at Kshs. 120 per share. The company's earnings are kshs.10 per share and it intends to maintain a dividend payout ratio of 50% at the end of the financial year. The company's expected net income is 3 million and the available investment proposals are estimated to require Kshs. 6 million. Required: Using the Modigliani and Miller (MM) proposition on dividend irrelevance, show that the payment of dividends does not affect the value of the firm. (14 marks)
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