What does the dividend irrelevance proposition suggest will be the impact on shareholder wealth if a company funds an increase in dividends by cutting back investments in current projects?
A)Shareholders will be no better or worse off.
B)Shareholders will be better off.
C)Shareholder will be worse off.
D)Insufficient information to determine

Question

Quizplus · Accepted Answer

According to the dividend irrelevance proposition, a company's dividend policy has no impact on shareholder wealth. Therefore, if a company funds an increase in dividends by cutting back investments in current projects, shareholders will be no better or worse off.

What Does the Dividend Irrelevance Proposition Suggest Will Be the Impact