In spite of the theoretical argument that dividend policy should be irrelevant, the fact remains that many companies do pay dividends to the shareholders. Please explain. (10 marks)

(b) The liability section of the Myburger Corporation balance sheet is as follows.

Debt 1,800,000 Common Stock

Par (2 par, 100,000 shares) 200,000

Capital in excess of par value 400,000 Retained Earnings 900,000 3,300,000

The current market price of the common shares is 20. Reconstruct the financial statement assuming that (a) A 15 percent stock dividend is issued and (b) A two-for-one stock split is declared.