CFA Practice Question

There are 131 practice questions for this study session.

CFA Practice Question

Which of the following assumptions is not necessary for dividend irrelevance?

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
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