On July 20, 2004, Microsoft surprised the market by announcing a $3 dividend. The exdividend date was November 17, 2004, and the payment date was December 2, 2004. Its stock price at the time was about $28. It also changed the terms of its employee stock options so that each exercise price was adjusted downward to Closing price — $3.00 Pre-dividend exercise price x Closing price The number of shares covered by each stock option outstanding was adjusted upward to Closing Price Number of shares pre-dividend x Closing price --- $3.00

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