- CFA Exams
- CFA Level I Exam
- Study Session 7. Corporate Finance (1)
- Reading 21. Analysis of Dividends and Share Repurchases
- Subject 1. Dividend policy and company value: theory
CFA Practice Question
If capital markets are perfect and there are no taxes, the dividend decision ______.
A. dramatically affects stockholder wealth
B. does not affect stockholder wealth
C. will likely depend on the raising of new capital
Explanation: According to Miller and Modigliani, the value of the firm is determined by the future earnings power of its assets and not by the way in which the earnings are distributed.
User Contributed Comments 1
| User | Comment |
|---|---|
| murli | Perfect capital market & no tax world are the assumptions of MM theory. |