The correct answer is: B. According to Walter, the optimal payout ratio for a growth firm is 100%.
A. Effective dividend policy is an important tool to achieve the goal of wealth maximisation. A firm’s dividend policy is a decision about how much of its earnings to distribute to shareholders as dividends and how much to retain for reinvestment. A well-designed dividend policy can help a firm to attract and retain investors, and to manage its cash flow.
C. MM model asserts that the value of the firm is not affected whether the firm pays dividend or not. The Modigliani-Miller theorem, also known as the MM theorem, is a theorem in corporate finance that states that in a perfect market, the value of a firm is not affected by its capital structure. This means that the firm’s capital structure, or the mix of debt and equity financing, does not affect its cost of capital or its value.
D. Bird-in-the-hand theory’ in reference to dividend decision has been developed by Myron Gordon. The bird-in-the-hand theory is a theory of dividend policy that states that investors prefer to receive dividends in cash rather than having to wait for capital gains. This is because dividends are a more certain form of income than capital gains.
The optimal payout ratio for a growth firm is not 100%. A growth firm is a firm that is expected to grow at a rate that is significantly higher than the average growth rate of the economy. Growth firms typically have high levels of investment, which means that they need to retain a large portion of their earnings to finance their growth. As a result, the optimal payout ratio for a growth firm is typically lower than the optimal payout ratio for a mature firm.