owns remain the same. A stock split involves issuing a substantial amount of additional
shares and reducing the per-value of the stock on a proportional basis.A stock split is often prompted by a desire to reduce the market price per share, which
make it easier for small investors to purchase shares.o Dividend policies in practice
a) Constant Payout Ratio
i) Rarely used
b) Pure Residual Policy
i) Relatively unusual for strict adherence
ii) Often used for setting target payout ratios
c) Stabilized Dollar Dividend
i) Most commonly followed policy
d) Low regular Dividend plus Extra
i) Followed by a number of large corporations
STOCK REPURCHASES – Alternative to Cash Dividends
a) Methods:
i) Open market purchase of Treasury stock
ii) Tender offer made directly to stockholders
iii) Negotiated Block Purchase❖ CAPITAL BUDGETING
Every decision the firm makes is a capital budgeting decision whenever it changes the
company’s cash flows. Capital budgeting is the process of making long term planning
decisions for investments. There are typically two types of investment decision. (1)