AFB,IncDeclared a Dividend of $2 Per Share,which Was an Increase

question 49

Multiple Choice

AFB,Inc.declared a dividend of $2 per share,which was an increase of 25% from the prior year,yet AFB,Inc.stock declined by 3% the day of the announcement.DAS,Inc.declared a dividend of $2 per share,which was the same as the prior year,and its stock increased in value by 2% on the day of the announcement.These events could be most readily explained by the

• A) information effect.
• B) clientele effect.
• C) expectations theory.
• D) residual dividend theory.

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Definitions:

Fixed Manufacturing Overhead

Costs related to the production that remain constant regardless of the level of manufacturing activity, such as building lease payments or salaries of permanent staff.

Book Value

The net value of a company's assets found on its balance sheet, calculated as total assets minus liabilities and intangible assets.

Equipment Replacement

The process of substituting old, outdated, or failed machinery with newer, more efficient models or versions to maintain or enhance production efficiency.

Opportunity Costs

The benefit lost when one alternative is chosen over another, representing the cost of forgoing the next best alternative.