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Which of the following is NOT an assumption used in MM-without-tax analysis?
A100% dividend payout
BNo transaction costs
CNo taxes
DPerfect capital markets
Answer & Solution
Correct answer: A. 100% dividend payout
1. MM (no tax) assumes: no taxes, no transaction costs, perfect markets, homogeneous expectations.
2. It does NOT require 100% dividend payout.
3. Hence option C is not an assumption.
_Source: ICAI BoS CA Inter Paper 6A, Ch 5 "Financing Decisions — Capital Structure", §2.4_