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QUESTION

The price per share, prior year's earning per share, dividend paid, and whether or not the firm is included in the DJIA were recorded for a random

6.947 1.902 3.652 0.002

A firm whose stock is not included in the DJIA is faced with the decision of whether or not to increase its dividend by $0.05, thus holding earnings fixed, or decrease its dividend by $0.20, which would have the effect of increasing earnings by $0.30. If the firm's aim is to maximize this expected share price, which alternative should it choose based on the results of this model? Would your answer change if the firm's stock were included in the DJIA? If so, how?

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