The argument that dividend policy is irrelevant tends to be supported by which one of these factors?
A)Flotation costs associated with equity issues
B)Current tax laws
C)An unsatisfied demand for high-dividend-paying stocks
D)Current equilibrium in the clientele dividend market
E)The current tax exclusion available to corporate investors

Question

Quizplus · Accepted Answer

The argument that dividend policy is irrelevant is supported by the current equilibrium in the clientele dividend market, as posited by the Modigliani-Miller theorem, which suggests that investors can create their own dividend policy through buying and selling stocks, making the firm's dividend policy irrelevant in perfect markets.

The Argument That Dividend Policy Is Irrelevant Tends to Be