The 'bird-in-the-hand' argument, associated with Gordon's model, states that:

Correct answer: C) Investors value a rupee of dividend today more than an uncertain capital gain in future, so they discount distant returns at a higher rate

Explanation

Gordon argued that investors are risk-averse and see near dividends as more certain than future capital gains. So a higher retention (and more distant return) raises the discount rate investors apply, and dividend policy matters even when r = Ke. Dividend irrelevance in perfect markets is the MM view.