What Stock Price Reaction Would You Expect from a Firm

question 114

Multiple Choice

What stock price reaction would you expect from a firm that unexpectedly raises its dividend permanently and by a substantial amount?

• A) Price should rise, given dividend discount models.
• B) Price should decline, given discounted cash flow analysis.
• C) Price will remain constant, due to market efficiency.
• D) Price will remain constant, due to random-walk behavior.

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Definitions:

Behaviourally Anchored Rating Scale (BARS)

A method used for appraising the performance of employees, involving specific examples of effective or ineffective job behaviors.

Performance Achievement

The process of meeting and exceeding set performance standards or goals within an organization.

Expected Behaviours

The conduct or actions that an organization anticipates from its employees, based on its values, policies, and culture.

Critical-Incident Technique

A method used in management and training to collect direct observations of human behavior to identify events that lead to success or failure.