Stock Dividend

Question 1

Contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference.

Question 2

A firm’s stock has a beta of 1.05, the expected return on the market is 12 percent, and the risk-free

rate is 5 percent. The firm’s marginal tax rate is 30%. If the firm were to issue new common stocks,

investment bank will charge 6% flotation cost. From this information, if the firm decides to spend

retained earnings in positive NPV project, what would be the cost of the retained earnings?

Question 3

JKL preferred stocks have the par value of $90 and pay dividend of 9%. Currently the

market trades JKL’s preferred stock at a required return of 12.5%. JKL’s marginal tax rate is

20%. If there are 2,000,000 of preferred shares outstanding traded in the market, how much

money does JKL need to retire all of these preferred shares?

Question 4

What is the purpose of the criminal justice system? Discuss with reference to recent policy changes and developments.