Assess why, under ideal condition the value of the firm is unaffected by the dividend policy...

Assess why, under ideal condition the value of the firm is unaffected by the dividend policy ?

Expert Solution

Ans.1. I would like to describe ideal conditions in which the value of the firm is unaffected by the dividend policy:

1.1. Stable dividend policy : In this conditions, it ensures consistency of future income to the shareholders. So that company have to prefer stable dividend policy as it does not impact on value of the firm.

1.2. Favourable share price: A strong and effective policy will command a high market price for company's shares than other companies. so that it will not impact on the value of the firm.

1.3. Value of information: A company has to provide sufficient information to the shareholders for maintaining transparency and accountability. this things maximise the value to the firm.

1.4. Government Support : when the company follow each and every rules and regulations made by the government. due to this, company gets good ratings from different credit rating agency, it will enhance the value of the firms and the current dividend policy will not impact on the company.

jeff jeffy answered 1 year ago

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Assess why, under ideal condition the value of the firm is unaffected by the dividend policy...

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