Modigliani and Miller (MM) on the one hand and Gordon and Lintner (GL) on the other hand have expressed strong views regarding the effect of dividend policy on a firms cost of capital and value a In essence, what are MMs and GLs views regarding the effect of dividend policy on the cost of capital a...

a MM argue that dividend policy has no effect on r s thus no effect on firm value and cost of capita ...

Modigliani and Miller (MM) on the one hand and Gordon and Lintner (GL) on the other hand

Question:

Modigliani and Miller (MM) on the one hand and Gordon and Lintner (GL) on the other hand have expressed strong views regarding the effect of policy on a firm’s and value.
a. In essence, what are MM’s and GL’s views regarding the effect of policy on the and stock prices?
b. How could MM use the information content, or signaling, hypothesis to counter their opponents’ arguments? If you were debating MM, how would you counter them?
c. How could MM use the concept to counter their opponents’ arguments? If you were debating MM, how would you counter them?

clientele Effect
Clientele effect explains the movement in a company's stock price according to the demands and goals of its investors. These investor demands come in reaction to a tax, dividend or other policy change which affects the shares. The clientele effect... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...