1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
yaroslaw [1]
3 years ago
7

According to Modigliani and Miller, a firm's value is determined solely by the earning power and risk of its assets and that the

manner in which it splits its earnings stream between dividends and internally retained funds does not affect this value.
True or False?
Business
1 answer:
Varvara68 [4.7K]3 years ago
5 0

Answer:

True

Explanation:

Modigliani and Miller or MM hypothesis states that dividend policy of a firm plays no role in the determination of the market value of it's stock or the market value of the firm.

As per the theory, dividend policy of a firm is irrelevant and does not affect the value of the firm.

The theory maintains that under specific set of assumptions, the capital structure of a firm and it's composition does not play any role in determining the value of a firm and no capital structure can be termed as optimal.

It further states, the value of a firm is determined by capitalizing it's expected return with the firm's average cost of capital. Also, a firm cannot change the total value of it's securities by splitting it's cash flows into different streams such as dividends or retained earnings.

A firm's value is determined by a firm's real assets and not by it's issued securities.

You might be interested in
Below are the account balances for Cowboy Law Firm at the end of December.
drek231 [11]

Answer:

<u>Cowboy Law Firm</u>

<u>Income statement for the year ended December.</u>

                                            $

Service revenue              8,900

Less Expenses :

Salaries expense           (2,000)

Utilities expense              (1,100)

Net Income / (Loss)         5,800

Explanation:

Income statements shows Revenues earned and Expenses incurred at the end of the trading period.

6 0
3 years ago
Vinnie (our friend in the video) had a lot of credit cards, and he did have fun with them! Then he nearly went broke. What was t
anyanavicka [17]

The main thing Vinnie did wrong was have multiple credit cards, and it say sin the question 'had fun with them' he probably did not monitor how much money he was spending.

8 0
3 years ago
Just before colliding with another vehicle, you should __________.
S_A_V [24]
Just before colliding with another vehicle, you should t<span>ake your foot off the brake pedal.
</span><span> There are several things you can do in order to minimize the consequences of collisions. One of them is to take your foot off the brake pedal. Other are:
- If possible, swerve to the right side of the road when you take evasive action.
</span><span>- Another general rule is to hit an object with a glancing blow (at an angle) rather than head-on.</span>
4 0
3 years ago
Required : You are to prepare the Arc's federal income tax return in good form . You are not to complete an Ohio state income ta
Oduvanchick [21]
D
D
D
s
S
S
As
Dssss


- Harvard university professor
4 0
3 years ago
Read 2 more answers
In which type of economy is a business owner most likely to benefit from free<br> enterprise?
Colt1911 [192]
Most likely would be a democratic system.
7 0
3 years ago
Other questions:
  • Kristen Lu purchased a used automobile for $10,100 at the beginning of last year and incurred the following operating costs: Dep
    14·1 answer
  • An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of:
    9·1 answer
  • Which of the following characteristics would lead the auditor to assess control risk at a higher level?a. It is difficult for th
    5·1 answer
  • Your friend fills out their first tax form and is confused between adjusted and gross income. How can you explain the difference
    6·1 answer
  • How often do regulatory agencies track banks fiscal conditions? (Select all that apply.)
    14·2 answers
  • Emily Corporation sells two products: hurricane lamps and flashlights. Hurricane lamps account for 70 percent of the units sold,
    15·1 answer
  • What is true about the payments with closed-end credit?
    14·1 answer
  • The following units of a particular item were available for sale during the calendar year:
    10·1 answer
  • EcoMotors’s disclosure notes for the year ending December 31, 2017, included the following regarding its $0.001 par common stock
    6·1 answer
  • How should a christiandetermine whether to obey a specific command from his government?
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!