The ability of shareholders to undo the dividend policy of the firm and create an alternative dividend payment policy via reinvesting dividends or selling shares of stock is called (a):

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The ability of shareholders to create their own dividend payment policy by reinvesting dividends or selling shares of stock is called homemade dividends. This concept is related to MM Proposition I, which suggests that the value of a firm is determined by its earning power and the risk of its assets rather than its dividend policy. Perfect foresight model is a term used in finance to refer to a situation where all market participants have access to the same information at the same time. Capital structure irrelevancy is a theory that suggests that the way a firm finances its operations does not affect its value. Homemade leverage is a strategy used by investors to adjust the risk of their portfolio by borrowing or lending funds.

The Ability of Shareholders to Undo the Dividend Policy of the Firm