Which of the following is the assumption of the MM model on dividend policy?

The firm has an infinite life is the assumption of the MM model on dividend policy. According to Miller and Modigliani Hypothesis or MM Approach, dividend policy has no effect on the price of the shares of the firm and believes that it is the investment policy that increases the firm’s share value.

Which of the following are assumptions of the Modigliani Miller mm model?

The basic Modigliani-Miller models proposition is based on the following key assumptions:

  • There are no taxes.
  • No transaction costs, as well as bankruptcy cost, is nil.
  • There is a symmetry of information.
  • The cost of borrowing is the same for investors as well as companies.
  • There is no floatation cost.

Which of the following is are the assumptions of MM approach?

The assumptions of M.M. Hypothesis are:

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(i) Perfect capital markets; (ii) Investors are rational; (iii) There are no transaction costs; … Alternatively, there are no differences in tax rates between capital gains and dividends.

Which of the following is not the assumption of MM theory of dividend?

All the firms pay tax on their income at the same rate is not an assumption in the Miller & Modigliani approach. … The theory stated that the value of the firm is not dependent on the choice of capital structure or financing decisions of the firm.

Which of the following is the assumption of the MM model of capital structure?

The firm has an infinite life is the assumption of the MM model on dividend policy. According to Miller and Modigliani Hypothesis or MM Approach, dividend policy has no effect on the price of the shares of the firm and believes that it is the investment policy that increases the firm’s share value.

Which of the following is MM model propositions Mcq?

The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as: MM Proposition I with no tax. MM Proposition II with no tax.

What is MM model?

The Modigliani-Miller theorem (M&M) states that the market value of a company is correctly calculated as the present value of its future earnings and its underlying assets, and is independent of its capital structure.

What are the assumptions of Modigliani and Miller approach?

The Modigliani and Miller Approach assumes that there are no taxes, but in the real world, this is far from the truth. Most countries, if not all, tax companies. This theory recognizes the tax benefits accrued by interest payments. The interest paid on borrowed funds is tax deductible.

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What do you mean by MM approach of capital structure?

This suggests that the valuation of a firm is irrelevant to the capital structure of a company. … Whether a firm is high on leverage or has a lower debt component has no bearing on its market value.

Which of the following is not an assumption of MM Proposition 1?

Capital markets are perfect is not an assumption in Miller and Modigliani approach. The Modigliani-Miller theorem (M&M) states that the market value of a company is calculated using its earning power and the risk of its underlying assets and is independent of the way it finances investments or distributes dividends.

Which among the following is irrelevant in respect to dividend according to MM model?

◦Modigliani-Miller have argued that firm’s dividend policy is irrelevant to the value of the firm. ◦According to this approach, the market price of a share is dependent on the earnings of the firm on its investment and not on the dividend paid by it.

Which of the following is not a true for MM model?

If ke = r, then under Walter’s Model, which of the following is irrelevant?

Q. Which of the following is not true for MM Model?
B. share price goes down if dividend is not paid,
C. market value is unaffected by dividend policy,
D. all of the above.
Answer» c. market value is unaffected by dividend policy,

Which one of the following is not true about dividend decision?

Dividends can be paid only when there are profits. Dividends can be paid when there are losses. Stock dividend does not affect liquidity position of the company.

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