Purchase Solution

Debating between 2 for 1 stock split, or 15% stock dividend

Not what you're looking for?

Ask Custom Question

A firm is debating between an 2 for 1 stock split, or a 15% stock (non cash) dividend. The current price of the stock is $100.00. Assume the stockholder currently owns 100 shares.

2 for 1 stock split 15% stock (non cash) dividend

# shares ____ ______

Stock Price ____ ______

Which increases stockholder wealth more, the stock split or stock dividend? Explain.

Purchase this Solution
Solution Summary

Your tutorial includes a chart that computes the value of the holding before and after for both of these stock issue scenarios. A few sentences explains why the result that is shown occurs.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Motivation

This tests some key elements of major motivation theories.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

View More Free Quizzes
Related BrainMass Solutions

  • Stock Dividend , Stock Split, Reverse Stock Split and ROE for Menomonie Publishing

    What would be the effect on the number of shares outstanding and on the stock price of the following: 15% Stock Dividend 4-for-3 Stock Split Reverse 3-for-1 Stock Split 2) Last year both Hudson Homes and Baldwin Construction earned $1 million

  • Corporate Actions - Stock Dividend and Stock Split

    What would be the effect on the number of shares outstanding and on the stock price of the following: 1. 15% Stock Dividend 2. 4-for-3 Stock Split 3. Reverse 3-for-1 Stock Split Banannas Inc. has stock currently selling for $40 per share.

  • Stock Dividend, Stock Split, Reverse Stock Split

    What would be the effect on the number of shares outstanding and on the stock price of the following: 1. 15% Stock Dividend 2. 4-for-3 Stock Split 3.

  • Stock Dividend, stock split and Return on Equity

    What would be the effect on the number of shares outstanding and on the stock price of the following: 15% Stock Dividend 4-for-3 Stock Split Reverse 3-for-1 Stock Split Last year both Hudson Homes and Baldwin Construction earned $1 million

  • How to Calculate the Value of Stock Splits and Dividends

    Assuming no market imperfections or tax effects exist, what will the share price be after: 1. RC has five-for three stock split? 2. RC has a 15 % stock dividend? 3. RC has a 42.5% stock dividend? 4.

  • Stock Splits and Stock Dividends for Roll Corporation

    (b) Share price after 15% stock dividend = 78/(1+15%) = 78/1.15 = $67.83 (c) Share price after 42.5% stock dividend = 78/(1+42.5%) = 78/1.425 = $54.74 (d) Reverse stock split share price = 78*7/4 = $136.50 The solution computes share price under

  • Dividends and Taxes, Stock Split and Stock Dividend

    RC has a five-for-three stock split? b. RC has a 15% stock dividend? c. RC has a 42.5 % stock dividend? d. RC has a four-for-seven reverse stock split? #7. The market value balance sheet for outbox manuf is shown here.

  • Hinckley Company - Stock dividend, Stock Split

    Hinckley is considering the following two courses of action: (1) Declare a 10% stock dividend on the 80,000, $10 par value shares out standing, or (2) effect a 2-for-1 stock split that will reduce par value to $5 per share.

  • Difference Between a Stock Dividend and a Stock Split?

    Dividends and Stock Splits Problem: What is the difference between a stock dividend and a stock split? As a stockholder, would you prefer to see your company declares a 100% stock dividend or a 2-for-1 split?

View More Related Solutions