- 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
Miller and Modigliani argue that in a world with perfect markets and no taxes
B. management provides a valuable service to investors in allocating earnings between dividends and reinvestment in the firm.
C. investors wishing to receive higher current income than provided by the firm can do so by decreasing their holdings in the firms' shares.
A. investors will prefer firms having dividend payout policies inline with their income requirements.
B. management provides a valuable service to investors in allocating earnings between dividends and reinvestment in the firm.
C. investors wishing to receive higher current income than provided by the firm can do so by decreasing their holdings in the firms' shares.
Correct Answer: C
According to Miller and Modigliani, investors can increase their current income by selling some of the shares that they own and realizing capital gains.
User Contributed Comments 2
| User | Comment |
|---|---|
| kalps | I.e. dividends are 'IRRELEVANT' capital gains are used to realise gains |
| ceekay | higher 'current' income - current being the operative word |