1. If management wants to maximize its stock price, and if it believes that the dividend irrelevance theory is correct then it must adhere to the residual dividend policy. True or False
2. It as been argued that investors prefer high payout companies because dividends are more certain (less risky) than the capital gains that are supposed to come from retained earnings. However, Miller and Modigliani say that this argument is incorrect, and they call it the "bird-in-the-hand fallacy." MM base their argument on the belief that most dividends are reinvested in stocks, hence are exposed to the same risks as reinvested earnings. True or False