Choose the correct answer with explanation.

FINEX Corporation has common and preferred shares outstanding that recently paid a dividend of PhP 10 per share. Which of the following is correct?

• Both prices should be the same if markets are efficient and the required returns are the same
• Both prices should be the same since the dividends are the same
• The price of the common stock is expected to be higher if the required return on the common stock is lower than the required return on preferred stock
• The price of the common stock will be lower if dividends are not expected to grow