m/af/servlet/quiz?quiz action takeQuiz&quiz;_probGuid QNAPCOA8010100000041ebc610
ID: 2658298 • Letter: M
Question
m/af/servlet/quiz?quiz action takeQuiz&quiz;_probGuid QNAPCOA8010100000041ebc610040000&ctx-ream; 1. DIViaena policy Aa Aa A firm's value depends on its expected free cash flow and its cost of capital. Distributions made in the form of dividends or stock repurchases impact the firm's value and the investors in different ways. In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their financial needs. This circumstance is an illustration of: O The free cash flow hypothesis O The residual dividend policy OThe signaling hypothesis O The clientele effect Consider the case of Green Mountain Producers Inc., and answer the question that follows: Green Mountain Producers Inc. is an oil drilling company. The company paid a dividend of $1.75 last year, and, in the past, its dividend has increased steadily by about 4% a year. Green Mountain just announced that its dividend win increase to $2.50 this year, and its share price rose from $30 per share to $33 per share immediately after the announcement. Which of the following best explains why Green Mountain's stock price increased as it did? O The clientele effect O The signaling hypothesis O Dividend irrelevance theory Modigliani and Miller argued that each sharcholder can construct his or her own dividend policy. This statement is Truc O False Modigliani and Miller also pointed out that many institutional investors do not pty taxes and can buy and sell stocks with very low transaction costs. For these investors, dividend policy is nvestor relevant than it is for an individual Some resorchors and analysts have noticed ? bend n stich firms that increase their dividends see an ncrease in tiheir stock price The theory of 80 P11 ? rS Fl FSExplanation / Answer
Q1) Clientele Effect beacuse a particular behavior is seen in some clients
Q2) The Signaling Hypothesis
Q3) True
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.