a) You are comparing the dividend policies of three dividend-paying utilities.

You have collected the following information on the ex-dividend behavior of these firms.

	NE Gas	SE Bell	W Electric
Price Before	52	73	100
Price After	50	68	96
Dividend/share	4	5	5

If you are a tax-exempt investor, which company would you use to make "dividend arbitrage" profit? How would you go about doing so?

b) When firms increase dividends, stock prices tend to increase.

One reason given for this price reaction is that dividends operate as a positive signal.

What is the increase in dividends signaliing to mrkets? Will markets always believe the signal? Why or why not?