Required:

a. What is the effect on the stock price when a firm repurchases its shares under perfect capital markets?

b. Do you agree with the statement In Australia, the date on which a firm pays out dividends is called the ex-dividend date? Explain.

c. Miller and Modigliani (1963) assume the existence of corporate taxes when deriving capital structure theories. Answer the following:

i. With taxes, how would the cost of equity and the WACC change as a firm gears up? Briefly compare the effects of gearing up when there are taxes with the effects when there are no taxes

ii. What is the optimal capital structure based on this theory? Briefly explain why or why not it is observed in reality.

d. If the market is semi-strong form efficient, is it also weak-form efficient? Explain.