3. Which of the following statements are true regarding Modigliani and Miller’s approach to dividend policy?...
3. Which of the following statements are true regarding Modigliani and Miller’s approach to dividend
policy?
I.
In a world without taxes and transactions costs and perfect capital markets, the dividend
policy of a firm is irrelevant.
II.
In a world with taxes, transactions costs and perfect capital markets, the dividend policy of a
firm is irrelevant.
III.
With brokerage fees, dividend policy will increase the value of the firm paying dividends.
A)
I only
B)
II only
C)
I and III
D) II and III
E) I, II, and II
Homework Answers
the two assumptions of the theory are:
- There is a perfect capital market
- There are no taxes.
the answer is then:
I. In a world without taxes and transactions costs and perfect capital markets, the dividend policy of a firm is irrelevant.
Add Answer to:
3. Which of the following statements are true regarding
Modigliani and Miller’s approach to dividend
policy?...
Which of the following statements are correct in relation to Modigliani and Miller’s propositions in a...
Which of the following statements are correct in relation to Modigliani and Miller’s propositions in a frictionless perfect capital market? A. The required return on assets is equal to the weighted average cost of capital. B. The risk of a firm’s equity is determined by the debt-equity (D/E) ratio. C. A firm’s cost of equity is a linear function of the debt-equity (D/E) ratio. D. The cost of equity declines when the amount of leverage used by a firm rises....
Which of the following statements regarding dividends and dividend policy is LEAST true? A. With ...
Which of the following statements regarding dividends and dividend policy is LEAST true? A. With no taxes, the idea of homemade dividends implies that dividend policy doesn't matter. B. A stock repurchase may be a preferable alternative to dividends, for investors in higher tax brackets. C. The clientele effect suggests that investors prefer higher dividend paying stocks. D. The signalling effects of dividends imply that a firm may be able to increase firm value by increasing dividends
Which of the following statements about dividend policy is (are) most likely TRUE: Tax rates are...
Which of the following statements about dividend policy is (are) most likely TRUE: Tax rates are the primary determinate of dividend policy Increases in dividends tend to lag increases in earnings per share Management is usually reluctant to decrease dividend payments unless absolutely necessary I II III I, III II, III
Which of the following is TRUE? I. With perfect capital markets, a firm's WACC is independent...
Which of the following is TRUE? I. With perfect capital markets, a firm's WACC is independent of its capital structure and is equal to its equity cost of capital if the firm is unleveraged. II. Given a 35% corporate tax rate, for every £1 in new permanent debt that the firm issues, the value of the firm increases by £0.35. III. A key assumption of MM's Proposition I without taxes is that individuals can borrow on their own account at...
The residual dividend policy approach to dividend policy is based on the theory that a firm’s...
The residual dividend policy approach to dividend policy is
based on the theory that a firm’s optimal dividend distribution
policy is a function of the firm’s target capital structure, the
investment opportunities available to the firm, and the
availability and cost of external capital. The firm makes
distributions based on the residual earnings.
Consider the case of Red Bison Petroleum Producers Group:
Red Bison Petroleum Producers Group is expected to generate
$140,000,000 in net income over the next year. Red...
Given the following statements regarding fiscal policy, which is/are TRUE? (i). A decrease in a government’s budget defi...
Given the following statements regarding fiscal policy, which is/are TRUE? (i). A decrease in a government’s budget deficit should lead to a fall in interest rates in a country. (ii). Changes in tax rates do not directly affect monetary policy. (iii). Increased borrowing by a government generally leads to a drop in interest rates. (iv). When a country is in recession, then decreasing taxes may deepen the recession. (v). For a progressive tax system, when people earn more, a country’s...
2. Which of the following statement is true regarding the Modigliani and Miller (M&M) propositions (1958)...
2. Which of the following statement is true regarding the Modigliani and Miller (M&M) propositions (1958) in a perfect financial market? A) Capital structure is irrelevant because of the assumption that investors and companies have differing tax rates. B) It is assumed that the firm’s future cash flows remain fixed under any circumstances. C) The basic lesson of M&M propositions is that company’s capital budgeting decisions are dependent upon the company's capital structure decision. D) The debt-to-equity ratio is an...
14. The residual dividend modelThe residual dividend policy approach to dividend policy isbased on...
14. The residual dividend modelThe residual dividend policy approach to dividend policy is based on the theory that a firm’s optimal dividend distribution policy is a function of the firm’s target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings.Consider the case of Yellow Duck Distribution Company:Yellow Duck Distribution Company has generated earnings of $240,000,000. Its target capital structure consists of 60% equity...
Please answer ASAP: Which of the following are factors that favor a high dividend policy? I....
Please answer ASAP: Which of the following are factors that favor a high dividend policy? I. stockholders desire for current income II. tendency for higher stock prices for high dividend paying firms III. investor dislike of uncertainty IV. high percentage of tax-exempt institutional stockholders I and III only II and IV only I, III, and IV only II, III, and IV only I, II, III, and IV
CH 14:3. The residual dividend modelThe residual dividend policy approach to dividend policy is...
CH 14:3. The residual dividend modelThe residual dividend policy approach to dividend policy is based on the theory that a firm’s optimal dividend distribution policy is a function of the firm’s target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings.Consider the case of Purple Hedgehog Forestry Group:Purple Hedgehog Forestry Group has generated earnings of $240,000,000. Its target capital structure consists of 60%...
Most questions answered within 3 hours.
-
While rotating the tires on your car you notice a rock [mass =
0.1 Kg] stuck...
asked 18 minutes ago -
Using MARS simulator, write MIPS programs according to
the following scenarios: Receive a positive integer number...
asked 2 hours ago -
An object in front of a concave mirror has a real image that is
11.5 cm...
asked 2 hours ago -
Consider the reaction, C3 H8 + O2 --> CO2 + H2O. How many
moles of O2...
asked 4 hours ago -
You and your opponent both roll a fair die. If you both roll the
same number,...
asked 4 hours ago -
In a study of the accuracy of fast food drive-through orders,
Restaurant A had 257 accurate...
asked 4 hours ago -
Identify and describe in detail the four categories of
institutions that could be included in a...
asked 4 hours ago -
In python
class Customer:
def __init__(self, customer_id, last_name, first_name, phone_number, address):
self._customer_id = int(customer_id)
self._last_name =...
asked 4 hours ago -
What is an example of a limitation in implementing a new
ERP system and how it...
asked 4 hours ago -
In a section of 9.7cm of an artery with a radius of 2.6mm there
is a...
asked 4 hours ago -
the two carboxylic acid groups of aspartic acid have different
acidities with pKa values of 2.1...
asked 4 hours ago -
Would CuCO3 aqueous salt combined with calcium chloride
form a solid precipitate? If so, what would...
asked 4 hours ago