Which of the following companies will probably realize an increase in its stock

Question

Which of the following companies will probably realize an increase in its stock price?

I. AB Corp., which has paid a 6% increase per year, has announced a dividend increase from $2.00 to $2.08
II. CD Corp., which has had strong growth but has never paid a dividend, has announced it will begin paying out 30% of its earnings
III. EF Corp., which has paid $1.60 in dividends each of the last six years, will begin paying $2.00 in dividends this year

Select one:

A. I only

B. II only

C. III only

D. I and II only

E. I and III only

F. I, II, and III

Conway Corporation has increased cash dividends over the past few years in response to shareholder demands. The company has also divested certain under-performing assets over the same period of time. What is the likely effect to be upon Conway's stock price?

I. The stock price will probably increase because of a positive clientele effect
II. The stock price will probably decrease because of a negative signaling effect
III. The stock price will probably increase because of a positive signaling effect

Select one:

A. I only

B. II only

C. III only

D. I and II only

E. I and III only

F. II and III only

Explanation / Answer

Ans 1 option B , as company is a growth company and at the same time it is also distributing the dividends. This will attract new investors and thus stock price will rise.

ans 2 option E both clientele effect and signalling effect will increase the stock price.

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