A Stock Has a Normal Trading Range of $22 to $30

question 354

Multiple Choice

A stock has a normal trading range of $22 to $30. The stock is currently selling at $41 a share. It would be common for a firm in this situation to:

• A) Repurchase outstanding shares by issuing debt securities.
• B) Do a reverse stock split to lower the market price of the stock.
• C) Issue a one-time special dividend.
• D) Increase the number of outstanding shares via a stock split.
• E) Issue a liquidating dividend to lower the value of the firm.

---

Definitions:

Net 45

A payment term indicating that full payment is expected within 45 days from the invoice date.

Economic Order Quantity

A formula used to determine the most efficient quantity to order to minimize the costs associated with buying, holding and stockout.

Carrying Costs

Expenses associated with holding or maintaining an inventory, including storage, insurance, and taxes.

Fixed Costs

Expenses that do not change in total regardless of the level of production or sales activity.