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Basic Question 9 of 10
The MM dividend irrelevance argument states that dividend decision is independent of a company's:
II. financing decisions.
III. investment decisions.
I. operating decisions.
II. financing decisions.
III. investment decisions.
User Contributed Comments 4
| User | Comment |
|---|---|
| StJohnDale | Anyone know why? |
| arudkov | i know about I: value of a firm depend on business risk. so - operating decisions DO matter. but investment do so 2. hmm.. |
| ericczhang | MM Dividend irrelevance basically says dividend policy does not affect Firm (Securites)Value. If dividends don't affect firm (securities) value, a firm paying dividends have the same cost of capital as an identical firm not paying dividends. In this case dividends do not affect a firm's financing decision. If dividends don't affect cost of capital, then they have no effect on how firms make investment decisions. |
| PJMOHAN | The MM Dividend irrelevance theory assumes that the Co has a given capital budget and that its current capital structure and debt ratio are optimal.Another way of stating this is that the div decision is independent of investing and financing decision. (Curriculum - Page 130 last para) |
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Learning Outcome Statements
compare theories of dividend policy and explain implications of each for share value given a description of a corporate dividend action;
CFA® 2025 Level II Curriculum, Volume 3, Module 16.