Assignment 14- Distributions to Shareholders: Dividends and Share Repurchases Back to Assignment Keep the Highest: /6 Attempts: 1. Dividend policy 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. In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their financial needs. This circumstance is an illustration of: O The clientele effect O The free cash flow hypothesis The residual dividend policy The signaling hypothesis Consider the case of Purple Sage Producers Inc., and answer the question that follows: Purple Sage Producers Inc. is an oil drilling company. The company paid a dividend of $3.10 last year, and, in the past, its dividend has increased steadily by about 4% a year. Purple Sage just announced that its dividend will Increase to $4.20 this year, and its share price rose from $38 per share to s40 per share immediately after the announcement. Assignment 14- Distributions to Shareholders: Dividends and Share Repurchases Back to Assignment Keep the Highest: /6 Attempts: 1. Dividend policy 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. In some cases, analysts notice that groups of similar investors tend to flock to stocks that have dividend policies consistent with their financial needs. This circumstance is an illustration of: O The clientele effect O The free cash flow hypothesis The residual dividend policy The signaling hypothesis Consider the case of Purple Sage Producers Inc., and answer the question that follows: Purple Sage Producers Inc. is an oil drilling company. The company paid a dividend of $3.10 last year, and, in the past, its dividend has increased steadily by about 4% a year. Purple Sage just announced that its dividend will Increase to $4.20 this year, and its share price rose from $38 per share to s40 per share immediately after the announcement