Which one of the following is not the assumption of the Modigliani-Miller Irrelevance Theory of Dividend Policy?
A. No personal or corporate income taxes.
B. Dividend policy has its effect on firm’s cost of equity.
C. Capital investment policy is independent of its dividend policy.
D. Stock floatation or transaction cost does not exist.
Answer:B
Which one of the following is not the assumption of the Modigliani-Miller Irrelevance Theory of Dividend Policy?
A. No personal or corporate income taxes. B. Dividend policy has its effect on firm’s cost of equity. C. Capital investment policy is independent of its dividend policy. D. Stock floatation or transaction cost does not exist.