The Modigliani and Miller Dividend Irrelevance Theorem Is Based on the Argument

question 35

Multiple Choice

The Modigliani and Miller dividend irrelevance theorem is based on the argument that:

• A)Dividends are preferred to capital gains
• B)Dividends and capital gains are perfect substitutes
• C)Capital gains are preferred to dividends
• D)Investors don't value dividends, hence dividends are irrelevant

---

Definitions:

Simulation Analysis

A process of modeling a real-world system or process through a computer program to study its behavior under various conditions.

Scenario Analysis

The process of examining and evaluating possible events or scenarios that could affect the outcome of a decision or investment.

Operating Cash Flow

Cash generated by a company’s normal business operations, indicating whether a company can generate sufficient positive cash flow to maintain and grow its operations.

Degree Of Operating Leverage

The Degree of Operating Leverage measures how a company's operating income changes in response to a change in sales, indicating the sensitivity of profits to variations in sales volume.