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Yesterday, a firm announced an unexpected decrease in dividend from $.0.10 per share to $0.09 per share. In your opinion, the share price probably fell
Yesterday, a firm announced an unexpected decrease in dividend from $.0.10 per share to $0.09 per share. In your opinion, the share price probably
- fell because the change conveyed negative information about the firms future cash flows.
- was unaffected because it is a small change and investors and managers do not worry about small changes in dividends.
- rose because the investors would now receive more returns via capital gains and these gains are taxed at a lower rate.
- rose because the decrease indicated the managers desire to de-emphasize dividends.
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