In a world with no taxes, no information or transaction costs, a fixed real investment policy, a dividend policy should not affect the value of a firm.

Question

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In a world with no taxes, no information or transaction costs and a fixed real investment policy, the firm's value is solely determined by its real investments. Dividend policy only affects the distribution of profits to shareholders, but does not affect the firm's underlying investment opportunities or cash flows. Therefore, the firm's value should not be affected by its dividend policy.

In a World with No Taxes, No Information or Transaction