Miller and Modigliani's indifference proposition regarding dividend policy
A)assumes that tax rates increase at the same rate as inflation.
B)assumes that investors can sell their stock at a fair price.
C)states that investors are indifferent between stock dividends and cash dividends.
D)states that investors are indifferent between stock repurchases and cash dividends.

Question

Quizplus · Accepted Answer

Miller and Modigliani's indifference proposition assumes investors can sell their stock at a fair price, meaning there are no transaction costs or informational asymmetries that would prevent an investor from realizing the full value of their investment. The proposition states that investors are indifferent between stock dividends and cash dividends if they can sell their stock at a fair price, but it does not address tax rates or stock repurchases.

Miller and Modigliani's Indifference Proposition Regarding Dividend Policy