177Change tolow-dividend-payout policy.

Scott currently owns400shares of TwelveColonies, Inc. Twelve Colonies has ahigh-dividend-payout policy and this year will pay a $2.40cash dividend on itsshares, which are selling currently at$24.00.

Scott wants alow-dividend-payout policy of5% of the stock price. What will Scott need to do to convert thishigh-dividend-payout policy to alow-dividend-payout policy forhimself? Assume a world of no taxes and transaction costs.What will Scott need to do to convert thishigh-dividend-payout policy to alow-dividend-payout policy forhimself? (Select the best response.)

A.Scott needs to sell22.22shares of stock.

B.Scott needs to sell20.00shares of stock.

C.Scott needs to do nothing.

D.Scott needs to purchase20.00more shares of stock.

E.Scott needs to purchase22.22more shares of stock.

178Change tohigh-dividend-payout policy.

Kevin currently owns700shares ofCylon, Inc. Cylon has alow-dividend-payout policy and this year will pay a $0.25cash dividend on itsshares, which are selling currently at$23.50. Kevin wants ahigh-dividend-payout policy of7.5% of the stock price. What will Kevin need to do to convert thislow-dividend-payout policy to ahigh-dividend-payout policy forhimself? Assume a world of no taxes and transaction costs.What will Kevin need to do to convert thislow-dividend-payout policy to ahigh-dividend-payout policy forhimself? (Select the bestresponse.)

A.Kevin needs to sell45.54shares of stock.

B.Kevin needs to purchase45.54more shares of stock.

C.Kevin needs to sell45.05shares of stock.

D.Kevin needs to purchase45.05more shares of stock.

E.Kevin needs to do nothing.