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Aquamanu Developments is authorized to issue 500,000 shares. To date, the company has 185,000 shares issued and 150,000 outstanding. Aquamanu is considering declaring a dividend
Aquamanu Developments is authorized to issue 500,000 shares. To date, the company has 185,000 shares issued and 150,000 outstanding. Aquamanu is considering declaring a dividend to its common shareholders. Management is recommending the board of directors to consider the following options at the next meeting scheduled for March 1:
1. | The boards of directors should approve a motion directing the company to pay a dividend of $0.40 per share on May 1 to shareholders of record on April 15 or | |
2. | The board should approve a motion directing the company to declare a 10% stock dividend. Aquamanu would distribute one common share for every 10 common shares currently held. The companys common shares are currently selling for $50 per share. |
1) Describe how each dividend would affect Aquamanus net debt as a percentage of total capitalization.
2) Which of the two dividends would have an impact on the share price, if any? Why?
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