Which theory advocates that the dividend policy of an entity is purely a residual decision and a part of its financing decision?

Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R. Assertion A: The dividend decision represents a fundamental trade-off between the distribution of net earnings to shareholders and the retention of profits within the enterprise for future reinvestment. Reason R: The specific proportion of earnings allocated to dividends versus retained earnings is dictated by the underlying rationale of the firm's profitability, liquidity, and available investment opportunities. In the light of the above statements, choose the most appropriate answer from the options given below:

James E. Walter's model, which argues that dividend policy affects firm valuation, is based on which of the following assumptions?