According to Walter's Model of Dividend, market value of the share of a declining firm (having r < ke)…

According to James E. Walter's Dividend Relevance Model, a firm whose internal rate of return is less than its cost of equity (r < ke) is a 'declining firm' that lacks profitable investment opportunities. Because shareholders can earn a higher return (ke) by reinvesting dividends themselves than the firm can earn internally (r), the market value per share is maximized at a 100% Dividend Payout ratio (zero retention).