iv. You made an investment in a portfolio that have made returns during the last five years as given in the table below. Year Return % -10 2 12 3 18 4 -16 5 6 a. Calculate the average return for the five year holding period If your investment was Rs.23 million how much is the value of the investment after five year period? (05 Marks) (Total 20 Marks) Question 05 i. ii. iii. iv. v. vi. What is meant by capital structure? (02 Marks) Briefly explain Modigliani and Miller theory of capital structure. (02 Marks) What is meant by dividend policy? (02 Marks) Briefly explain followings: The bird-in-the-hand theory Dividend irrelevance theory c. Tax preference theory (06 Marks) Briefly explain residual dividend policy. (02 Marks) A company requires Rs, 800,000 for their capital budget requirement in next year. The company currently maintains its target capital structure 40% debt and 60% equity. The company's current net profit is Rs. 600,000. a. How much of this profit should we pay out as dividends? b. If there is a drop in net income to Rs.400,000, how much of profit are paid as dividends? c. If there is a net income increase to Rs.800,000, how much of dividends are paid? (06 Marks)