Choose the correct answer w/ explanation. FINEX Corporation has common and preferred shares outstanding that recently paid a dividend of PhP 10 per share. Which of the following is correct? Both prices should be the same if markets are efficient and the required returns are the same Both prices should be the same since the dividends are the same The price of the common stock is expected to be higher if the required return on the common stock is lower than the required return on preferred stock The price of the common stock will be lower if dividends are not expected to grow

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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[28] Choose the correct answer w/ explanation. FINEX Corporation has common and preferred shares outstanding that recently paid a dividend of PhP 10 per share. Which of the following is correct?

  • Both prices should be the same if markets are efficient and the required returns are the same
  • Both prices should be the same since the dividends are the same
  • The price of the common stock is expected to be higher if the required return on the common stock is lower than the required return on preferred stock
  • The price of the common stock will be lower if dividends are not expected to grow
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