ASSIGNMENT

Q.1 Who are the holder of the Record when does the stock sell x dividend?

Ans: A person who purchase the share two business days before the Transaction Date he will be the
holder of the record because his name would add in record book by Board of Directors and those are
eligible to receive the dividend on specific time period also known as “Record date”.

Suppose if: 10 April is date of transaction so he must have to purchase the share on 7 th April to
receive a dividend and this could make 8 th April ex-dividend Date.

Q.2 Compare the Stock dividend and Stock Split?

Ans: A stock dividend is a payment to shareholders that is made in shares rather than in cash it
occurs when Organization use the amount to purchase the extra common shares for shareholder
therefore Organization give extra share in form of written to shareholder so he could sell in market
to receive a profit. And stock split occurs to increase the number of shares outstanding and reduce
the stated value per share. It happens when organization issue two or more new shares for those
who has already did investment in form of shares.

Stock Dividend

 It is costly to issue then cash dividends

 It is payment to existing owner of a dividend in form of stocks

Stock Split

 A method to decrease the market price by increasing the number of shares belonging to
each shareholder.
 It is not a type of dividend.
 It does not affect the firm’s capital structure.

Problem: 12.3
Solution

A. Residual dividend Policy is a method wherein a firm considers all the adequate venture
openings at that point delivers out the profit to the investors as a sum left over as a
residual. Subsequently, it implies on the off chance that a firm has magnificent investment
opportunities, at that point dividend will be in littler sum and the other way around.

B.

Investment Opportunities Schedule

Items ISO 1 ISO 2 ISO 3
1 Capital Budget 20,00,000 30,00,000 40,00,000
2 Debt 40 % 8,00,000 12,00,000 16,00,000
3 Equity Needed 60 % 12,00,000 18,00,000 24,00,000
4 Retain Earning Available 20,00,000 20,00,000 20,00,000
5 Dividends 8,00,000 2,00,000 0
6 Dividend payout ratio 40% 10% 0%
C. The number of dividends paid is reduced as capital consumptions increment. Thus, if the
firm chooses larger capital investments, dividend payment will be smaller or non-existent.