A key assumption of the Miller and Modigliani (MM)dividend irrelevance argument is that
A)future stock prices are certain.
B)firms have an adequate supply of Treasury shares.
C)there exists a risk-free asset.
D)new shares are sold at a fair price.

Question

Quizplus · Accepted Answer

The Miller and Modigliani dividend irrelevance theory assumes that new shares are sold at a fair price, among other assumptions, implying that the financing decisions (like dividend payments) do not affect the firm's value in a perfect market.

A Key Assumption of the Miller and Modigliani (MM)dividend Irrelevance