Dividends affect option value because they reduce the stock price expected over the option’s life.

• Calls lose value when dividends increase.
• Puts gain value when dividends increase.
• The Black-Scholes framework can be adjusted for known dividends by using the stock price reduced by the present value of expected dividends during the option’s life.

Therefore:

• A is false: the model can be modified.
• B is true.
• C is false: higher dividends reduce call value.
• D is false: higher dividends increase put value, not decrease it.

So the correct answer is B.