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Which of the following statements is incorrect ( least correct ) ? Theoretically, the price of a share of stock will decline by the present
Which of the following statements is incorrect least correct
Theoretically, the price of a share of stock will decline by the present value of the dividend given up when the stock goes ex dividend.
To evaluate theoretical changes in dividend policy we assume that capital budgeting investing and capital structure financing decisions have already been made. Thus, increasing a dividend is accomplished by issuing new equity and decreasing a dividend is accomplished by repurchasing existing equity.
The preemptive right is important because it protects existing shareholders against dilution of their ownership interests.
If a share of stock is growing at a constant rate, then the growth rate of dividends should be equal to the growth rate of price capital appreciation In addition, if the stock price is in a state of equilibrium, then this growth rate should also be equal to the investors' required rate of return minus the expected dividend yield.
The price sensitivity of a share of common stock increases with the time remaining until it matures.
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