Under the Idealized Conditions of MM, Which Statement Is Correct

Under the idealized conditions of MM, which statement is correct when a firm issues new stock in order to pay a cash dividend on existing shares?

A) the new shares are worth less than the old shares.
B) the old shares drop in value to equal the new price.
C) the value of the firm is reduced by the amount of the dividend.
D) the value of the firm is unaffected.

Correct Answer:

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