Which of the following statements would be consistent with the dividend irrelevance theory?
A) There is no relationship between a firm's dividend policy and the value of its common stock.
B) Perfect capital markets are assumed to exist which allow investors to buy and sell stock without incurring any transaction costs.
C) Investors are indifferent whether stock returns come from dividend income or capital gains income.
D) All of the above

Question

Quizplus · Accepted Answer

All three statements A, B, and C are consistent with the dividend irrelevance theory. The theory suggests that a firm's dividend policy has no impact on the value of its common stock, assuming perfect capital markets where transaction costs do not exist, and investors do not show any preference towards dividend income or capital gains income. Therefore, all of the above choices are consistent with the dividend irrelevance theory.

Which of the Following Statements Would Be Consistent with the Dividend