Which of the following is not an assumption underlying the M&M dividend irrelevance proof?
A)All market participants (e.g.management and shareholders)have the same information.
B)There are no costs of issuing shares.
C)There are no personal or corporate taxes.
D)There are costs of trading shares.

Question

Quizplus · Accepted Answer

The assumption that there are costs of trading shares is actually one of the key assumptions underlying the M&M dividend irrelevance proof. This assumption is necessary to show that the value of a firm is independent of its dividend policy. Therefore, D is the incorrect option.

Which of the Following Is Not an Assumption Underlying the M&M