General Studies · Dividend Decisions
According to Modigliani and Miller (MM) dividend irrelevance theory, dividend policy does not affect firm value because:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Dividends are taxed higher than capital gains
- 2Firms cannot retain earnings
- 3Capital markets are perfect and investors can create their own dividend policy✓
- 4Investors prefer current dividends over capital gains
Correct answer
Capital markets are perfect and investors can create their own dividend policy
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