Refer to the financial statements of American Eagle (Appendix B) and Urban Outfitters (Appendix C).

Required:

1. A few years ago, American Eagle Outfitters split its stock. Describe the impact that the split would have on the market value of the stock compared to a company that did not split its stock.

Why do some companies elect to split their stock?

2. Calculate the dividend yield ratios for Urban Outfitters (assume the market price of the stock is $28) and American Eagle (assume the market price of the stock is $15) for the most recent reporting year.

3. Why would an investor choose to invest in a stock that does not pay dividends?

4. Using the information from the following table, compare the dividend-related industry average ratios for the retail apparel industry to the pharmaceutical industry and the electric utility industry. What type of investor would be interested in buying stock in a utility instead of a retail store?Why?

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DIVIDEND RATIOS FOR VARIOUS INDUSTRIES Retail Apparel Electric Utilities 3.8% American Electric Pharmaceuticals Dividend yield Example company 2.6% Eli Lilly 1.1% The GAP Power