Question Tag: Dividend irrelevance

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FM – Nov 2020 – L2 – Q4c – Dividend Policy

Distinguish between dividend irrelevance theory and traditional dividend relevance theory, and explain dividend relevance theories.

There are two major opposing views of dividend policy: the Modigliani and Miller’s dividend irrelevance theory and the traditional view of dividend policy.

Required:

i) Distinguish between the TWO (2) opposing views of dividend policy. (2 marks)
ii) Explain TWO (2) of the dividend relevance theories. (3 marks)

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FM – Nov 2020 – L2 – Q4c – Dividend Policy

Distinguish between dividend irrelevance theory and traditional dividend relevance theory, and explain dividend relevance theories.

There are two major opposing views of dividend policy: the Modigliani and Miller’s dividend irrelevance theory and the traditional view of dividend policy.

Required:

i) Distinguish between the TWO (2) opposing views of dividend policy. (2 marks)
ii) Explain TWO (2) of the dividend relevance theories. (3 marks)

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