Business, 06.06.2020 19:59 dunk36

Erin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) dividend irrelevance theory. Based on your understanding of MM’s argument and the impact of the assumptions applied to the argument. Erin: Modigliani and Miller (MM) divident irrelevance theory is based on several assumptions, however, in the real world these assumptions do not apply. Mia: Issuance or flotation costs impact divident policy decisions, and companies do not care about whether to retain earnings or distribute dividends. Erin: You are right Mia. Due to the issuance costs with new equity sales, companies tend to makemore desirable. Mia: If a company pays out dividends and needs funds to invest in profitable projects, it would need to generate capital through new stock issues which isexpensive than using internal cash flow.

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Erin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) dividend irre...

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