AFB,IncAnd DAS,Inc

question 70

Multiple Choice

AFB,Inc.and DAS,Inc.both paid a $2 per share dividend last year.This year,AFB,Inc.announces an increase to $3 per share while DAS,Inc.announces an increase to $2.50 per share.After the announcement,the price of DAS,Inc.stock increases and the price of AFB,Inc.'s stock decreases.Which of the following best explains this situation?

• A) The stock market is irrational.
• B) AFB, Inc. had higher agency costs than DAS, Inc. prior to the announcement.
• C) Both companies need to raise capital for positive NPV projects, and flotation costs are high.
• D) Capital markets are perfect.

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Definitions:

Rosemary

A fragrant herb commonly used in cooking, which also has potential health benefits, such as antioxidant properties and enhancing memory.

Olfactory

Relating to the sense of smell, often involving the olfactory system which includes the nose and brain.

Cranial Nerve

One of twelve nerves that arise directly from the brain, not the spinal cord, and control various functions from muscle movement to sensory information.

Auditory Nervous System

The part of the nervous system responsible for processing auditory information, from the ears to the brain.