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    Question

    According to Modigliani-Miller theory, if a firm’s

    investment policy is fixed, how does dividend decision affect the value of the firm?
    A Positively Correct Answer Incorrect Answer
    B Negatively Correct Answer Incorrect Answer
    C No effect Correct Answer Incorrect Answer
    D Depends on capital structure Correct Answer Incorrect Answer

    Solution

    According to the MM Hypothesis, in a perfect capital market, dividend policy is irrelevant to firm value.

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