If a Firm Unexpectedly Raises Its Dividend Permanently and by a Substantial

question 74

Multiple Choice

If a firm unexpectedly raises its dividend permanently and by a substantial amount,the firm's stock price:

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

---

Definitions:

Trimester

One of the three roughly equal periods into which a pregnancy is divided, each lasting about three months.

Brain Structures

The various parts of the brain, each responsible for different functions, such as the cerebrum for thought and action, the cerebellum for movement, and the limbic system for emotions.

Lateral Hypothalamus

An area of the brain thought to control hunger and thirst; destruction of this area can cause an animal to refuse food and water.

Aphagic

The inability to swallow, which can be due to various neurological or physical disorders.