Modigliani and Miller (MM), on the one hand, and Gordon and Lintner (GL), on the otherhand, have expressed strong views regarding the effect of dividend policy on a firm’s costof capital and value.a. In essence, what are MM’s and GL’s views regarding the effect of dividend policy onthe cost of capital and stock prices?b. How could MM use the information content, or signaling, hypothesis to counter theiropponents’ arguments? If you were debating MM, how would you counter them?c. How could MM use the clientele effect concept to counter their opponents’ arguments?If you were debating MM, how would you counter them?

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