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) Capital markets are perfect.
B) The stock market is irrational.
C) AFB, Inc. had higher agency costs than DAS, Inc. prior to the announcement.
D) Both companies need to raise capital for positive NPV projects, and flotation costs are high.
D
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A) grocery shoppers being served by checkout clerks B) commuters slowing or stopping at toll plazas to pay highway tolls C) machinery waiting to be repaired or maintained D) parcel delivery truck following its computer-generated route E) patients in a health clinic waiting to see one of several doctors
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