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shahabkhon shahabkhon
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Montreal Skaters Company has cash flow from operations of $100 million. Usually it pays a total annual dividend of $100 million. In an M&M world, can reducing the dividend result in an increase in the value of the firm?

▸ No, according to M&M dividends are irrelevant so there should be no change in the value of the firm.

▸ No, in fact it will decrease value because shareholders like dividends more than capital gains.

▸ Yes, because shareholders like capital gains more than dividends.

▸ Yes, as long as the yield on the new investments the firm makes is greater than the return required by the shareholders.
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
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djl4909djl4909
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