Modigliani and Miller are the main proponents of the view that the dividend policy is
irrelevant to the value of a company’s shares.
They argue that a company that continually reinvests its entire earnings would generate the same shareholder wealth if it engaged in a policy of high dividends and financed its expansion with funds obtained from rights issues.
Which THREE of the following statements are assumptions that are required in order to support this proposition?
A . There are no transaction costs involved in the issue of new shares (including rights issues).
B . There is a multiplicity of corporate and personal income tax rates.
C . Investors act in a rational manner.
D . The capital markets are efficient markets.
E . Investors do not always have access to perfect information.
Answer: A,C,D
Explanation:
Discursive_F0
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