Ask Question
BusinessBusiness
17 March, 22:28

Purple Sage Producers Inc. is an oil drilling company. The company paid a dividend of $1.75 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 $2.50 this year, and its share price rose from $30 per share to $33 per share immediately after the announcement.

Which of the following best explains why Purple Sage's stock price increased as it did?

a. The signaling hypothesis

b. Dividend irrelevance theory

c. The clientele effect

+2
Answers (1)
  1. 17 March, 22:31
    0
    Option A is the correct one.

    The signaling hypothesis

    Explanation:

    The idea that many actions taken by economic agents are motivated chiefly by the wish to send a positive 'signal' to other agents, rather than by their ostensible purpose. This can be a means of overcoming the problem of asymmetric information between transactors.

    This strategy was implemented by the Purple Sage Producers Inc. and this resulted in increased stock price.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Purple Sage Producers Inc. is an oil drilling company. The company paid a dividend of $1.75 last year, and, in the past, its dividend has ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
The first step in developing a knowledge management system is to:
Answers (1)
The Hondasaki Motorcycle Company has a normal two-stage absorption job-order costing system. They close over - or under-applied overhead directly into Cost of Goods Sold, and use expected production as their activity base.
Answers (1)
Inventory Control and Planning Neilsen Cookie Company sells its assorted butter cookies in containers that have a net content of 1 lb. The estimated demand for the cookies is 1,200,000 1 lb containers.
Answers (1)
You are doing some analysis on the has a market value that is equal to its book value. Currently, the firm has excess cash of $1,000 million and other assets of $9,000 million. Equity is worth $10,000 million.
Answers (2)
Treasury stock that was purchased for $2,500 is sold for $3,000. As a result of these two transactions combined, a. stockholders' equity will not change, because the amount of authorized stock has not changed. b.
Answers (1)
New Questions in Business
The Don't Tread on Me Tire Company had retained earnings at December 31, 2015 of $202,000. During 2016, the company had revenues of $402,000 and expenses of $351,000, and the company declared and paid dividends of $11,200.
Answers (1)
Which of the following refers to the acquisition of goods in one country and the selling of them to buyers in another country? a. Cartel b. Joint venture c. Trading company d. Outsourcing
Answers (1)
1. Of the 4 strategic approaches to international markets, which one (s) might be the best for a manufacturing company? a financial services company? or a company like Coke or Pepsi? Thoughts? 2.
Answers (1)
Masks Inc. is a cosmetics company that makes beauty products. It uses whale oil from dead whales only and does not kill whales to obtain blubber. A newspaper publishes a report stating that Masks Inc.
Answers (1)
Transfer payments are not included in gdp calculation because these are
Answers (1)
Home » Business » Purple Sage Producers Inc. is an oil drilling company. The company paid a dividend of $1.75 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 $2.
Sign Up Forgot Password?