Assume that when you were in high school you saved $1,000 to invest for your college education.You purchased 200 shares of Smiley Incorporated, a small but profitable company. Over the threeyears that you have owned the stock, the corporation’s board of directors have taken the followingactions:1. Declared a 2-for-1 stock split.2. Declared a 20 percent stock dividend.3. Declared a 3-for-1 stock split.The current price of the stock is $12 per share.a. Calculate the current number of shares and the market value of your investment.b. Explain the likely reason the board of directors of the company has not declared a cash dividend.c. State your opinion as to whether or not you would have been better off if the board of directorshad declared a cash dividend instead of the stock dividend and stock splits.
Assume that when you were in high school you saved $1,000 to invest for your college education.
You purchased 200 shares of Smiley Incorporated, a small but profitable company. Over the three
years that you have owned the stock, the corporation’s board of directors have taken the following
actions:
1. Declared a 2-for-1 stock split.
2. Declared a 20 percent stock dividend.
3. Declared a 3-for-1 stock split.
The current price of the stock is $12 per share.
a. Calculate the current number of shares and the market value of your investment.
b. Explain the likely reason the board of directors of the company has not declared a cash dividend.
c. State your opinion as to whether or not you would have been better off if the board of directors
had declared a cash dividend instead of the stock dividend and stock splits.
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