Question

MM theory of irrelevance is based on

A Efficient Market Hypothesis
B The Clientele Theory
C Optimal capital Structure theories
D Net Income approach

Answer 1

Answer:

B The Clientele Theory

Explanation:

MM say that if an investor gets a dividend that's more than he expected then he can re-invest in the company's stock with the surplus cash flow. If the expected dividend is too small, then he can sell a part of his shares and replicate the same cash flow he would get if the dividend was what he expected.