If a Firm Wants to Decrease the Per-Share Price of Its

question 3

Multiple Choice

If a firm wants to decrease the per-share price of its common stock, which of the following actions should it take? Assume everything else remains constant. 

• A)Initiate a 1-for-3 reverse stock split
• B)Initiate a 2-for-1 stock split
• C)Increase the per share dividend that it pays
• D)Repurchase some of its stock, and use the proceeds to pay off long-term bonds
• E)Issue a substantial amount of new bonds to finance capital budgeting projects that have negative net present values (NPVs)

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Definitions:

Income Tax

A tax levied by a government directly on personal, or organizational income.

Double Taxation

The levying of tax by two different authorities on the same income, asset, or financial transaction.

Saving Rate

The percentage of take-home pay that is set aside for savings instead of being used for consumer spending.

Economic Growth

A rise in the economy's inflation-adjusted value of produced goods and services over time.