ghts issue at a subscription price of $6 when the pre-announcement stock price was $9, will increase the number of shares by 12.5% and decrease the share price by 4.44%. b. 1 for 5 bonus issue will increase the number of shares by 20% and decrease the share price by 16.67%. c. 4 for 3 stock split will increase the number of shares by 33.33% and decrease the share price by 25%. d. 25% stock buy-back will decrease the number of shares by 25%. e.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A company conducts the following capital payout and raising policies. Assume that there are no taxes, no signalling effects and no transaction costs.

Which one of the following statements is NOT correct?
a.
1 for 8 rights issue at a subscription price of $6 when the pre-announcement stock price was $9, will increase the number of shares by 12.5% and decrease the share price by 4.44%.
b.
1 for 5 bonus issue will increase the number of shares by 20% and decrease the share price by 16.67%.
c.
4 for 3 stock split will increase the number of shares by 33.33% and decrease the share price by 25%.
d.
25% stock buy-back will decrease the number of shares by 25%.
e.
After cash dividend, normally the share price will fall.
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