a. Suppose that Liquid Force's stock price consistently falls by an amount equal to one-half the dividend

Question:

a. Suppose that Liquid Force's stock price consistently falls by an amount equal to one-half the it pays on the payment date. Ignoring taxes, can you think of an investment strategy to take advantage of this information?
b. If you and many others pursued this strategy, predict what would happen to Liquid Force's stock price on the payment date.
c. Suppose that Liquid Force's stock price consistently falls by an amount equal to twice the payment on the payment date. Ignoring taxes, can you think of an investment strategy to take advantage of this information?
d If you and many others pursued this strategy, predict what would happen to Liquid Force's stock price on the payment date.
e. In an efficient market, ignoring taxes and transaction costs, how do you think stock prices will change on payment dates?
f. Given that investors receive returns from in the form of dividends and capital appreciation, do you think that increasing dividends will benefit investors in the absence of taxes and transactions costs?
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...