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Hackworth Oil Company is an oil drilling company. The company paid a dividend of $1.50 last year, and in the past its dividend has increased
Hackworth Oil Company is an oil drilling company. The company paid a dividend of $1.50 last year, and in the past its dividend has increased steadily by 4% per year. Hackworth just announced that its dividend will increase to $2.10 this year, and its stock price rose from $28 to $30 immediately after the announcement. Which of the following theories best explains why the stock price increased as it did? The clientele effect Dividend irrelevance theory The signaling hypothesis 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
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