Due to Clientele Effect, Modigliani and Miller Argue That the Shareholders

question 12

True/False

Due to clientele effect, Modigliani and Miller argue that the shareholders get what they expect and, thus, the value of a firm's stock is unaffected by dividend policy.

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Definitions:

Owner's Equity

The total value of a business owned by its owners, calculated as the business's total assets minus its total liabilities.

Business Ownership

Refers to the control over a business enterprise, determining the management and profit allocation.

Sole Proprietorship

A business structure where a single individual owns, manages, and is personally responsible for all aspects of the business.

Corporation

A legal entity that is separate from its owners, offering limited liability protection to its shareholders, and having the ability to raise funds by selling stock.