1. Develop a theoretical framework with a diagram for the following situations and state two different hypotheses, one in the null and the other, in the alternate.
   1. If a company sustains its high earnings year after year, its credibility as a successful company would be enhanced and the public will believe it has further prospects for growth. This will help to explain how sustained earnings will increase the stock value of the company. Faith in the managerial competence of the key people in the company will hold the stock value high, even in times of mild recession. Usually, the higher the dividends, the higher the stock value; however, if the higher dividend declared is perceived as a stunt to hoodwink the public, the stock value will not go up. Only when the public expects that the dividend policy will be maintained by management in the future will the stock value of the company be influenced by the higher dividends that are declared.