- CFA Exams
- CFA Level I Exam
- Topic 4. Corporate Issuers
- Learning Module 16. Analysis of Dividends and Share Repurchases
- Subject 2. Dividend Policy and Company Value: Theory
CFA Practice Question
Which of the following assumptions is not necessary for dividend irrelevance?
B. Brokerage costs are equal to zero.
C. Floatation costs are equal to zero.
A. The corporate tax rate is greater than the personal tax rate.
B. Brokerage costs are equal to zero.
C. Floatation costs are equal to zero.
Correct Answer: A
The necessary assumptions for dividend irrelevance are zero transactions costs (brokerage and flotation) and no taxes.
User Contributed Comments 2
| User | Comment |
|---|---|
| kalps | Dividend irrelevance theory: 1) Transaction costs are ZERO 2) Taxes are ZERO |
| kodali | As dividends are double taxed in US, tax rates are irrelevent |