Briefly explain how each firm uses the dividend policy:

Firm A is a North American cigarette manufacturing company. It makes high profits, but knows that the future for its products and profits is limited. It knows it will not be able to expand its business or need to build any new factories. For the past several years it has had the following payout policy: Pay a cash dividend of $2/share every year and every third year pay a "special" dividend equal to the total amount of the earnings it has retained over the past 3 years divided by the number of shares outstanding. What dividend policy is it following?

Firm B runs a series of wellness spas in La-la land, a fantastic country with the world's only source of "La" - a recently-discovered substance that makes everyone happy. Due to the enormous wealth that will be generated by exporting "La" to the rest of the world, La-la land has been able to abolish all taxes. Furthermore, its investors can trade securities without brokerage fees. Some of the financial managers of the spa firm approach the Chief Financial Officer (CFO) and ask what they should pay for dividends this quarter. "Whatever you like," says the CFO. "And next quarter we may change it - we'll pay whatever we feel like then." What dividend theory is being followed?