Suppose there is a firm with 250,000 shares outstanding that is trying to decide whether to pay a $12 cash dividend or do a 2-for-1 stock split. The date of the stock split and the ex-dividend date would be the same. Suppose that the stock price of the company on the day before the ex-dividend/split date is $30. If the shareholders of this firm only want the option that leads to the highest stock price afterward (regardless of the total value of their portfolios), which option would they prefer (holding all else constant)? Question 1 options: a) They would prefer the cash dividend because the stock price immediately after would be $3 higher than under the stock split. b) They would prefer the stock split because the stock price immediately after would be $3 higher than under the cash dividend. c) They would prefer the cash dividend because the stock price immediately after would be $12 higher than under the stock split. d) They would prefer the stock split because the stock price immediately after would be $12 higher than under the cash dividend
Suppose there is a firm with 250,000 shares outstanding that is trying to decide whether to pay a $12 cash dividend or do a 2-for-1 stock split. The date of the stock split and the ex-dividend date would be the same. Suppose that the stock price of the company on the day before the ex-dividend/split date is $30. If the shareholders of this firm only want the option that leads to the highest stock price afterward (regardless of the total value of their portfolios), which option would they prefer (holding all else constant)?
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
