16-6. (Calculating the stock dividend) Eastern Bank Limited is a retail bank based in India and...

  

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16-6. (Calculating the stock dividend) Eastern Bank Limited is a retail bank based in India and has shown consistent good performance in recent years. The board of the bank has now raised concerns over the effects of the high share price of 6,400 per share. They feel that such a high share price is likely to make their shares less liquid and more unat-tractive for smaller investors. A range of 1,000 to 1,500, they argue, would be a good price range to make it sufficiently liquid and attractive. The CFO has suggested that they should make a bonus issue to achieve this objective. What should the bonus issue be to achieve the desired changes in the share price? 16-7. (Determining the size of a stock split) Reconsider the issue faced by the board of Eastern Bank Limited in Study Problem 16-6. Their investment banker has advised that they opt for a stock split rather than a bonus issue. If the board decides on a stock split, how many new shares will need to be created for each of the existing shares of Eastern Bank Limited? 16-6. (Calculating the stock dividend) Eastern Bank Limited is a retail bank based in India and has shown consistent good performance in recent years. The board of the bank has now raised concerns over the effects of the high share price of 6,400 per share. They feel that such a high share price is likely to make their shares less liquid and more unat-tractive for smaller investors. A range of 1,000 to 1,500, they argue, would be a good price range to make it sufficiently liquid and attractive. The CFO has suggested that they should make a bonus issue to achieve this objective. What should the bonus issue be to achieve the desired changes in the share price? 16-7. (Determining the size of a stock split) Reconsider the issue faced by the board of Eastern Bank Limited in Study Problem 16-6. Their investment banker has advised that they opt for a stock split rather than a bonus issue. If the board decides on a stock split, how many new shares will need to be created for each of the existing shares of Eastern Bank Limited?

Answer rating: 100% (QA)

166 Solution To calculate the bonus issue required to achieve the desired share price range we need to use the following formula Bonus Issue New Shares Old Shares Old Shares where New Shares is the to... View the full answer