If a U.S. company enters into a purchase agreement with a ...

[mydiamond]

If a U.S. company enters into a purchase agreement with a European company and the contract is
  denominated in euros, then direct exchange rate risk exists for both companies.
 
  Indicate whether the statement is true or false

Question 2

AFB, Inc and DAS, Inc both paid a 2 per share dividend last year. This year, AFB, Inc announces
  an increase to 3 per share while DAS, Inc announces an increase to 2.50 per share.
 
  After the
  announcement, the price of DAS, Inc stock increases and the price of AFB, Inc's stock decreases.
  Which of the following best explains this situation?
  A) Capital markets are perfect.
  B) The stock market is irrational.
  C) AFB, Inc. had higher agency costs than DAS, Inc. prior to the announcement.
  D) Both companies need to raise capital for positive NPV projects, and flotation costs are high.

[reelove4eva]

Answer to Question 1

FALSE

Answer to Question 2

D