On July 20, 2004 Microsoft surprised the market by announcing a $3 dividend. The ex-dividend date was November 17, 2004 and the payment date was December 2, 2004. Its stock price at the time was about $28. It also changed the terms of its employee stock options so that each exercise price was adjusted downward to
Pre-dividend Exercise Price × Closing Price - $3.00 / Closing Price
The number of shares covered by each stock option outstanding was adjusted upward to
Number of Shares Pre-dividend × Closing Price / Closing Price - $3.00
"Closing Price" means the official NASDAQ closing price of a share of Microsoft common stock on the last trading day before the ex-dividend date.
Evaluate this adjustment. Compare it with the system used by exchanges to adjust for extraordinary dividends.