The Share Price Falls When a Dividend Is Paid Because

question 67

Multiple Choice

The share price falls when a dividend is paid because the reduction in cash decreases the:

• A)liabilities of the firm.
• B)current account of the firm.
• C)market value of assets.
• D)equity of the firm.
• E)present value of future dividends.

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Definitions:

Duplex Mind

A concept suggesting the mind has two different processing systems, one automatic and unconscious, and the other deliberate and conscious.

Automatic System

A cognitive system that operates quickly and without conscious effort, responsible for fast and intuitive reactions and judgements.

Conscious System

Refers to the parts of the mind that are aware of surroundings, thoughts, and feelings at any given moment.

Planning Fallacy

The tendency for plans to be overly optimistic because the planner fails to allow for unexpected problems.