Discuss effect both on total return and on the capital gain

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1. In an efficient market, when should the stock price react to the value consequences of a dividend change? Discuss the effect both on the total return and on the capital gain. Which should be larger?

2. Comparing the dividend announcement effect of 24 basis points to a typical daily standard deviation (80 basis points) and round-trip transaction costs (about 30 basis points) suggests that firms should not bother with dividends. Discuss.

Reference no: EM131241499

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