As a copy editor with expertise in SEO, I am here to explain the concept of dividend irrelevance agreement of MM model that is based on several factors.

The dividend irrelevance agreement of MM model is a concept of finance that suggests the dividend policy of a company has no effect on its overall value. This proposition is based on some crucial elements that have an impact on the value of a firm.

Firstly, the MM model believes that the value of a firm is determined by its earning capacity and the risk associated with its investment. Therefore, the dividend policy of a company does not affect its earning capacity or the risk of investment, hence, it does not have any impact on the overall value of the firm.

Secondly, the MM model suggests that any investor can create their preferred cash flow through various means, including the sale of shares, issuing bonds, or a combination of both. Accordingly, investors will always seek to maximize their returns on investment, irrespective of the company`s dividend policy.

Thirdly, the MM model assumes that in a perfect market environment, investors have access to all relevant information at the same time, and they can make informed decisions based on this information. Therefore, dividends are perceived as irrelevant because the decision to sell or hold shares should only be based on the company`s earning capacity and risk of investment.

In conclusion, the dividend irrelevance agreement of MM model is based on several factors that determine a company`s overall value in a perfect market environment. These factors include the company`s earning capacity, risk of investment, and investor`s ability to create their preferred cash flow. Therefore, companies should focus on improving their earning capacity and reducing risk to maximize their value while investors should make informed investment decisions based on fundamental analysis instead of the company`s dividend policy.