Multiple Choice
Company A and Company B both paid a $2 per share dividend last year.This year,Company A announces an increase to $3 per share while Company B announces an increase to $2.50 per share.After the announcement,the price of Company B stock increases and the price of Company A's stock decreases.Which of the following best explains this situation?
A) The stock market is irrational.
B) Company A had higher agency costs than Company B prior to the announcement.
C) Both companies need to raise capital for positive NPV projects and flotation costs are high.
D) Capital markets are perfect.
Correct Answer:
Verified
Correct Answer:
Verified
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