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Firm A and firm B are considering a merger. Both firms have the exact same characteristics except that the dividend yield of firm B is
Firm A and firm B are considering a merger. Both firms have the exact same characteristics except that the dividend yield of firm B is higher than the one of firm A. The CEO of firm A argues, this is going to an excellent opportunity for our existing shareholders. After the merger, they can expect higher dividend yield. Letting them have the cash is better than the company retaining the earnings for growing the business.
In a paragraph, comment on the CEO's argument and explain why his argument is correct or not.
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