1. Dividend policy Aa Aa 3 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: The residual dividend policy The clientele effect O The signaling hypothesis O Dividend irrelevance theory Suppose a firm generates a lot of cash but has limited investment opportunities. Is this stock more likely to be a utility stock or a technology stock? In addition, is the stock more likely to provide a high or low dividend yield? O O O A technology stock that has a high dividend yield A utility stock that has a high dividend yield A utility stock that has a low dividend yield A technology stock that has a low dividend yield Which of the following statements is true? O Taxes on dividend income are paid in the year that they are received. Taxes on dividend income are paid when the stock is sold. As a result, the U.S. tax code encourages many individual investors to prefer to receive Another firm, called Robbem Power & Water, an established public utility company, has been paying dividends for the past 20 years. This year Robbem also announced that it will increase its dividends by 10%. Which class of investors is more likely to be pleased by Robbem's dividend announcement? O Investors with high tax rates who don't depend on current dividend income for living expenses Investors with low tax rates who depend on current dividend income for living expenses A firm's dividend policy determines its current clientele of investors