[Verse 1] Miller and Modigliani had a puzzle to solve Why do companies obsess over dividend revolve They built a perfect market, no taxes in sight No transaction costs lurking, information's bright Investors can create their own cash flow stream By selling shares when needed, fulfilling their dream [Chorus] Dividend irrelevance, that's the MM way Perfect markets make the payout choice okay Homemade dividends through share transactions Value stays the same through all interactions MM theory, crystal clear and true Dividend policy can't change value for you [Verse 2] Picture two identical firms, same earnings each year One pays dividends high, one keeps profits near In perfect markets, arbitrage will equalize The total return to investors, no surprise Capital gains or cash payments, it's all the same When markets are perfect, it's a zero-sum game [Chorus] Dividend irrelevance, that's the MM way Perfect markets make the payout choice okay Homemade dividends through share transactions Value stays the same through all interactions MM theory, crystal clear and true Dividend policy can't change value for you [Bridge] But assumptions matter, let's be real today Taxes favor capital gains, asymmetric information's at play Transaction costs and clientele effects appear Making dividend policy matter in markets here Perfect theory meets imperfect reality That's when dividend choices affect profitability [Verse 3] The dividend puzzle remains, but MM showed the core In frictionless markets, payout doesn't matter more Investment policy drives value, not how cash is distributed Miller-Modigliani's insight forever contributed Understanding perfect markets helps us see When dividend policy creates or destroys equity [Outro] MM dividend theorem, foundational and bright Perfect market assumptions shed theoretical light Though reality brings friction, the logic remains sound Dividend irrelevance, where perfect markets are found
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