Which of the Following Statements Would Be Consistent with the Dividend

question 69

Multiple Choice

Which of the following statements would be consistent with the Dividend Irrelevance Theory?

• A) There is no relationship between a firm's dividend policy and the value of its common stock.
• B) Perfect capital markets are assumed to exist which allow investors to buy and sell stock without incurring any transaction costs.
• C) Investors are indifferent whether stock returns come from dividend income or capital gains income.
• D) All of the above.

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Definitions:

Land

A fixed asset that represents property; it is considered a non-depreciable asset used in operations or investment.

Investment by Owner

The contribution of cash or other assets by an owner into their business, increasing the equity of the company.

Deficit

The amount by which expenses surpass income or revenues, resulting in a loss.

Retained Earnings

Profits that a company has reinvested in itself rather than paying out to shareholders as dividends.