Modigliani and Miller Suggest That the Value of the Firm

question 97

Multiple Choice

Modigliani and Miller suggest that the value of the firm is not affected by the firm's dividend policy, due to

• A) the clientele effect.
• B) the informational content.
• C) the optimal capital structure.
• D) the relevance of dividends.

---

Definitions:

Informed Party

An individual or entity possessing knowledge or information that gives them an advantage in transactions or decisions.

True Risks

The actual risks associated with an investment, activity, or decision, taking into account all factors and potential outcomes.

Generous Tip

A sum of money given to service workers that is significantly higher than the standard tipping percentage, often as a reward for exceptional service.

Signaling Mechanism

A method through which parties communicate information indirectly or directly to influence perceptions and decisions of others, often used in markets and negotiations.