The Purpose of a Stock Dividend Is To

question 114

Multiple Choice

The purpose of a stock dividend is to:

• A)avoid the taxes associated with a stock repurchase plan.
• B)keep the price in a trading range so it's accessible to small investors.
• C)immediately increase shareholder wealth.
• D)send a positive signal when the firm can't afford to give stockholders cash.

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Definitions:

Future Value

The value of a current asset or amount of money at a particular date in the future, calculated using a specified rate of growth or interest.

Compounded Semiannually

Compounded semiannually refers to the process of calculating interest on a principal sum and any accrued interest not only at the end of the year but also at a midpoint during the year, typically every six months.

Annual Interest

The amount of interest due over the course of a year on a loan or financial investment, typically expressed as a percentage of the principal.