Question: We stated in Section 1 6 - 3 that MM s proof of dividend irrelevance assumes that new shares are sold at a fair price.

We stated in Section 16-3 that MMs proof of dividend irrelevance assumes that new shares are sold at a fair price. Look back at Problem 19. 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?

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