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Confusing QBank question

If Modigliani and Miller’s dividend irrelevancy theory is correct, what is the impact on a firm’s cost of capital and share price if its dividend payout increases?

Cost of Capital Share Price


A) An increase A decrease


B) None None


C) None A decrease



Your answer: C was incorrect. The correct answer was B) None None

How come ? if dividend holders are getting higher dividends how come this is not compensated by a lower share price?

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