A firms 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 firms value and the investors in different ways. Some analysts have argued that a firms value should solely be determined by its basic earning power and the business risk of the firm. Which of these concepts would support these analysts argument? The residual dividend model The signaling hypothesis The clientele effect Dividend irrelevance theory Consider the case of Blue Water Producers Inc., and answer the question that follows: Blue Water Producers Inc. is an oil-drilling company. The company paid a dividend of $2.20 last year, and, in the past, its dividend has increased steadily by about 4% a year. Blue Water just announced that its dividend will increase to $2.90 this year, and its share price rose from $33 per share to $35 per share immediately after the announcement. Which of the following best explains why Blue Waters stock price increased as it did? Dividend irrelevance theory The signaling hypothesis The clientele effect Which of the following statements is true? 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 Lootem Power & Water, an established public utility company, has been paying dividends for the past 20 years. This year Lootem also announced that it will increase its dividends by 10%. Which class of investors is more likely to be pleased by Lootems dividend announcement? Investors with high tax rates who dont depend on current dividend income for living expenses Investors with low tax rates who depend on current dividend income for living expenses A firms dividend policy determines its current clientele of investors.