Suppose, since its inception, Porter Electronic Controls Inc.s markets have been expanding, and the company has...
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Suppose, since its inception, Porter Electronic Controls Inc.s markets have been expanding, and the company has enjoyed growth in sales and earnings. Some of its earnings have been paid out in dividends, but some are also retained each year, causing its earnings per share and stock price to grow. The company began its life with only a few thousand shares outstanding. After some years of growth, the stock price was so high that few people could afford to buy a "round lot" of 100 shares. Porter's CEO thought this limited the demand for the stock and thus kept the total market value of the firm below what it would have been if more shares, at a lower price, had been outstanding. Question: To correct this situation (the best policy is). Porter should - Orepurchase it stock split it stock O pay more dividend issue new stock Suppose, since its inception, Porter Electronic Controls Inc.s markets have been expanding, and the company has enjoyed growth in sales and earnings. Some of its earnings have been paid out in dividends, but some are also retained each year, causing its earnings per share and stock price to grow. The company began its life with only a few thousand shares outstanding. After some years of growth, the stock price was so high that few people could afford to buy a "round lot" of 100 shares. Porter's CEO thought this limited the demand for the stock and thus kept the total market value of the firm below what it would have been if more shares, at a lower price, had been outstanding. Question: To correct this situation (the best policy is). Porter should - Orepurchase it stock split it stock O pay more dividend issue new stock
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Solution The correct answer is Split the stock Expl... View the full answer
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor-Yi Tsay, Philip Old
Posted Date:
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