uid QNAPCOA8010100000041ebc6 100400008kctxeream-00578uckem 1533239848624 0AAA6804016417ADEF006C320000 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. Happy Whale Shipbuilders's CFO has stated that the firm will pay dividends only if acceptable capital budgeting opportunities do not exist. which concept did the CFO most likely base her decision on? O The clientele effect O Dividend irrelevance theory O The signaling hypothesis O The free cash flow hypothesis Consider the case of Red Dirt Producers Inc, and answer the question Red Dirt Producers Inc. is an oil driling company and has some free cash flow that is not expected to be used to finance future growth or potential investment projects. The company plans to distribute its free cash flow to its shareholders but is still deciding whether the distribution should take the form of a stock repurchase or the payment of a cash dividend. Which of the following is a characteristic of a firm's optimal dividend policy? O It maximizes the firm's earnings per share. O It maximizes the firm's stock price. O It maximizes the firm's total assets. O It maximizes the firm's return on equity. Modigliani and Miller argued that each shareholder can construct his or her own dividend policy. This statement is: O True O 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 investor relevant than it is for an individual 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 Lootem's dividend announcement? Investors with low tax rates who depend on ament dividend in orne for living expenses O Investors with high tax rates who don't depend on current dividend income for living expenses A firm's dividend policy determines its current clientele of investors