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Eduncle posted an MCQ
March 03, 2020 • 00:03 am 0 points
  • UGC NET
  • Management

Match the following constructs with underlying theories on dividend decisions:

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    Eduncle Best Answer

    Gordan says that investors values current dividends more highly than expected future dividends. According to Gordan, the market value of a share is equal to the present value of its expected future dividends. 
    Modigliani and Miller say that dividend decisions and retained earning decisions do not influence the market value of the shares, i.e. dividend policy is irrelevant for valuation.
    Professor James E. Walter has developed a theoretical model which shows the relationship between dividend policies and common stocks prices. All new investment opportunities of the firm are to be financed through retained earnings only and no external finance is available to the firm.

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