Miller and Modigliani also studied dividend policy and determined that in their world of perfect capital markets (no taxes,no bankruptcy costs,no asymmetric information)that dividend policy DOES matter.

Question

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Miller and Modigliani suggested that in a world of perfect capital markets, dividend policy would not matter, as investors have no preference between receiving dividends or capital gains.

Miller and Modigliani Also Studied Dividend Policy and Determined That