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Corp. is valued at $42,000 and has 14,000 shares of stock outstanding today. The board of directors will pass a resolution tomorrow to pay a

Corp. is valued at $42,000 and has 14,000 shares of stock outstanding today. The board of directors will pass a resolution tomorrow to pay a dividend of $1 per share to all shareholders. Which of the following statement is true? Assume no other news would change the firms fundamentals. Ignore tax.

A.

The stock price is $2 on the business day before the ex-dividend date and $2 on the dividend payment date.

B.

The stock price is $2.5 on the ex-dividend date and $2 on the dividend payment date.

C.

The stock price is $3 on the announcement date and $2 on the ex-dividend date.

D.

The stock price is $3 on the record date and $2 on the dividend payment date.

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