We stated in Section 16.4 that MMs proof of dividend irrelevance assumes that new shares are sold

Question:

We stated in Section 16.4 that MM’s proof of dividend irrelevance assumes that new shares are sold at a fair price. Look back at question 4. Assume that new shares are issued in year 1 at $10 a share. Show who gains and who loses. Is dividend policy still irrelevant? Why or why not?

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...