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)?
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- Please Provide correct answer with optionarrow_forwardSuppose you have two options for buying total 500 stocks. A: You can buy 1 stock from each of the 500 companies listed in S&P 500. B: You can buy 100 stocks from each of the top 5 companies (based on your judgement and study) listed in S&P 500. Based on empirical evidence you are most likely to gain more from which option?arrow_forwardSipacore Inc. is considering one of the three following courses of action: (1) paying a $0.50 cash dividend, (2) distributing a 5% stock dividend, or (3) effecting a 2-for-1 stock split. The current share price is $14 per share. Help Sipacore make its decision by completing the following chart (treat each possibility independently): Total assets (1) Before Action After Cash Dividend $1,196,000 1,146,000 (2) After Stock Dividend 1,196,000 $243,000 $ 243,000 $ 243,000 $ Total liabilities Shareholders' equity Common shares 647,000 Retained earnings Total shareholders' equity 647,000 306,000 256,000 953,000 903,000 710,000 306,000 953,000 Total liabilities and shareholders' equity $1,196,000 $ 1,146,000 $ 1,196,000 Number of common shares 100,000 100,000 105,000arrow_forward
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