Assume you are a corporate shareholder. Would you prefer to receive a stock dividend or a...

Assume you are a corporate shareholder. Would you prefer to receive a stock dividend or a cash dividend? Why?

Now assume you are a corporation. Would you prefer to issue a stock dividend or a cash dividend? Why?

Why do you think a company would want to retain earnings as opposed to distributing it to its shareholders?

In your opinion, why would a company decide to perform a stock split?

Expert Solution

As a corporate shareholder: I would prefer to receive a stock dividend because I can keep it as an asset for the future and I will receive extra stocks in the stock dividend. And, I am not required to pay taxes in case of a stock dividend. but if in case of cash dividend, I will be receiving cash which will get exhausted by time and hence left with nothing in hands in the future. So as a corporate shareholder, I would prefer to receive a stock dividend.

As a corporation: In a corporation, it depends on the situation of the company. If the company has enough cash and does not want to use ith in daily operations, then the company can declare the cash dividend. But, it will share the economic value of the company with the shareholders which results in a fall in prices of shares of the company. So, the company might declare stock dividends because it will minimize the distribution of the company 's cash and will increase the number of shares outstanding.

The company would want to retain earnings as opposed to distributing it to its shareholders because retained profits act as a portion of profits the company has. This will impact the financial position of the company. If the company will retain earnings then the profits of the company will be satisfactory which will attract more investors and hence results in more investments.

Stock - split is an action in which the company will split its existing shares into multiple shares. This will lower down the trading price of the stocks which will make the shares more liquid. Hence, investors will invest more in the company, increasing the value of the company.

jeff jeffy answered 1 year ago

If you were an individual, would you prefer to receive cash dividends, stock dividends, or stock...

If you were an individual, would you prefer to receive cash dividends, stock dividends, or stock split? Describe why and the benefits to support your decision.

Is a stock dividend influential for investors - or would the investor prefer to see equity...

Is a stock dividend influential for investors - or would the investor prefer to see equity growth (increased value of share prices) rather than distribution of funds? Please explain.

tax A paying investor would generally prefer a high dividend paying stock or a low dividend...

tax A paying investor would generally prefer a high dividend paying stock or a low dividend paying stock, all else the same (i.e. all else the same implies the low dividend stock reinvests the dividend that the high paying firm pays and thus creates capital gains)?

As a shareholder, would you prefer that the company file for Chapter 11 or Chapter 7?...

As a shareholder, would you prefer that the company file for Chapter 11 or Chapter 7? What if you were a bondholder? Why?

Why would you prefer to receive $100 today rather than wait and receive $100 one year...

Why would you prefer to receive $100 today rather than wait and receive $100 one year from now? Prompts: For the first part of the discussion post, list all the potential explanations you can think of for the time value of money. For each cause, write a sentence or two about how it explains your preference for money today rather than money at some future date. Let’s see how many different explanations we can uncover. For the second part of...

If you were to receive a $5 dividend on a stock you purchased for $20, what...

If you were to receive a $5 dividend on a stock you purchased for $20, what would your dividend yield be? What would be capital gain? total gain?

Would you prefer to receive an annuity due for $5,000 per year for 8 years or...

Would you prefer to receive an annuity due for $5,000 per year for 8 years or otherwise similar ordinary annuity? Interest rate is 7%. Explain numerically.

You own 1,000 shares of stock in Avondale Corporation. You will receive a dividend of $2.90...

You own 1,000 shares of stock in Avondale Corporation. You will receive a dividend of $2.90 per share in one year. In two years, the company will pay a liquidating dividend of $59 per share. The required return on the company's stock is 14 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal dividends...

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $1.50...

You own 1,100 shares of stock in Avondale Corporation. You will receive a dividend of $1.50 per share in one year. In two years, the company will pay a liquidating dividend of $45 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal...

You own 1,650 shares of stock in Avondale Corporation. You will receive a dividend of $1.50...

You own 1,650 shares of stock in Avondale Corporation. You will receive a dividend of $1.50 per share in one year. In two years, the company will pay a liquidating dividend of $54 per share. The required return on the company's stock is 20 percent. a. Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If you would rather have equal...

Question