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. Consider the scenario and answer the question that follows: Hackworth Co. is an oil drilling company and has some free cash flow that is not expected to be used for growth or investment projects. The company plans to distribute to its shareholders but is still deciding whether they should conduct a stock repurchase or distribute dividends Which of the following is a characteristic of a firm's optimal dividend policy? O It maximizes the firm's stock price. O It maximizes the firm's return on equity O It maximizes the firm's total assets. O It maximizes the firm's earnings per share Which of these statements is true? O Taxes on dividends are paid in the year that they are received. O Taxes on dividends are paid when the stock is sold. Consequently, the tax system encourages many individual investors to prefer Some researchers and analysts have noticed a trend in which firms that increase their dividends see an increase in their stock price. The theory of explains this phenomenon. In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their needs. This circumstance is an illustration of: The clientele effect O The information content effect