Since the expectations of the investors are always rational, there will be no effect of dividend policy on the valuation of the firm
If the investors have rational expectations, they will value a dividend paying firm higher than a non-dividend paying firm
If the declared dividend is in line with expectations of the investors, there will be no effect on the valuation of the firm
If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal
✅ The correct answer is D.
The rational expectations model of dividend policy says that If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal.
The rational expectations model of dividend policy says that If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal.