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. Lost Phjeon Avionics' CFO has stated that the firm will pay dividends only after all acceptable capital budgeting projects have been financed using retained earnings to the extent possible. Which concept did the cFo most likely base her decision on? The clientele effect Dividend irrelevance theory The signaling hypothesis The residual dividend model Consider the case of Green Mountain Producers Inc., and answer the question that follows: Green Mountain Producers Inc, is an oll-draling company. The company paid a dividend of $1.50 last yes, and, in the past, its dividend has increased steadily by about 4% a year. Green Mountain just announced that its dividend will increase to $2.10 this year, and its share price rose from $28 per share to $30 per share immediately after the announcement. Which of the following best explains why Green Mountain's stock price increased as it did? Dividend irrelevance theory The clientele effect The signaling hypothesis Modiglianl and Miller also pointed out that many institutional investors do not pay taxes and can buy and sell stocks with very low transaction costs. For these investors, dividend policy is relevant than it is for an individual investor. 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 lilustration of: the information content effect. the clientele effect. Modigliani and Miller argued that each shareholder can construct his or her own dividend policy. This statement is: True False Modigliani and Miller also pointed out that many institutional investors do not pay taxes and can buy and sell stocks with very low transaction costs. For these investors, dividend policy is relevant than it is for an individual investor. 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 information content effect. the clientele effect