MCQ

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April 29, 2018 at 4:32 pm #449351
humai
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Which of the following is the best statement of the conclusion of M & M on the relevance of dividend policy
A.all shareholders are indifferent between receiving dividend income and capital gains
B.increase in retentions results in a higher growth rate
C.discounting the dividends is not a suitable way to value the firms equity
D.the value of the shareholders equity is determine solely by the firms investment selection criteria
Sir correct answer is D but please can you explain ?
May 2, 2018 at 5:51 am #449754
John Moffat
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In a sense all of the statements are factually correct, but the relevance of them all is best stated by D – that the value of equity depends on how the company invests the shareholders money (how it gets distributed as dividend makes no difference).
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