GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A view that dividend policy of a firm has a bearing on share valuation advocated by James E. Walter is based on which one of the following assumptions.
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Return of investment function
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Cost of capital does not remain constant
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Retained earning is only source of financing
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All of the above
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Explanation:
Detailed explanation-1: -1. Walter’s model: Professor James E. Walterargues that the choice of dividend policies almost always affects the value of the enterprise.
Detailed explanation-2: -According to this theory, the dividend decision of a firm affects the market value of the firm. It suggests that shareholders prefer current dividend and there is a direct relationship between dividend decision and value of the firm. This theory was supported by two professors James E. Walter and Myron Gordon.
There is 1 question to complete.