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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.

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nikitadnepr [17]
<span>Businesses Management and Administration</span>
3 0
3 years ago
Read 2 more answers
Big-Mouth Frog Corporation had revenues of $200,000, expenses of $120,000, and dividends of $30,000. When Income Summary is clos
Aleksandr-060686 [28]

Answer:

Credit of $80,000

Explanation:

Big-Mouth Frog Corporation Calculation for Retained earnings

Using this formula

Retained earnings =Revenue- Expenses

Where,

Revenue =$200,000

Expenses =$180,000

Let plug in the formula

Retained earnings =$200,000-$180,000

Retained earnings =$80,000

Therefore when the Income Summary is closed to Retained Earnings, the amount of the credit to Retained Earnings will be $80,000

6 0
3 years ago
If an investor does not diversify his portfolio and instead puts all of his money in one stock, the appropriate measure of secur
Lady_Fox [76]

If an investor does not diversify his portfolio and instead puts all of his money in one stock, the appropriate measure of security risk for that investor is the "stock's standard deviation."

<h3>What is standard deviation?</h3>

The standard deviation would be a statistic that calculates as square root of a variance and indicates the dispersion of the a dataset compared to its mean.

Its standard deviation is determined as the square root of the variance by determining the deviation of each data point from the mean.

Some key features regarding the  standard deviation, are-

  • The standard deviation of a dataset reflects its dispersion compared to its mean.
  • A square root of a variance is used to compute it.
  • In finance, standard deviation is frequently employed as a measurement of an asset's relative riskiness.
  • The volatile stock has a large standard deviation, whereas a description stock has a low deviation.
  • The standard deviation, on the other hand, assesses all ambiguity as risk, especially when it is in the investor's advantage, such as above-average profits.

To know more about  standard deviation, here

brainly.com/question/475676

#SPJ4

7 0
1 year ago
On March 15, a fire destroyed Oriole Company's entire retail inventory. The inventory on hand as of January 1 totaled $6900000.
Nitella [24]

Answer:

approximately $6,676,000

Explanation:

the value of the inventory that was destroyed by fire = beginning balance on January 1 + purchases made before the fire + freight costs - cost of goods sold

inventory destroyed by fire = $6,900,000 + $3,032,000 + $342,000 - ($5,140,000 x 70%) = $10,274,000 - $3,598,000 = $6,676,000

6 0
3 years ago
What was the physical change that happens to Jodi’s character in Tall Girl? Movie
hjlf

Jodi is very tall at around 6 foot 1, she is very self-concious about it and doesn't really know how it happened

(She assumes it was a gene that may have skipped a generation or two)

It may be a gene mutation, and she has no idea how exactly it happened.     No one does.

8 0
3 years ago
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