Question
Q#1 (8 points). You read in chapter 14 that a 2:1 split would double the number of outstanding shares and half the earnings and dividends
Q#1 (8 points). You read in chapter 14 that a 2:1 split would double the number of outstanding shares and half the earnings and dividends per share, thereby lowering the stock price. From a purely technical perspective, a 2:1 stock split simply provides additional pieces of paper and should not affect the overall wealth of shareholders (shares doubles, prices drop one-half). So you are puzzled why some shareholders, traders, and analysts adamantly believe that stock splits benefit shareholders. For example, Apple announced a 7:1 stock split (one oustanding share converted to seven new shares) in 2014 which was aimed in part in boosting the Apple's stcok price. Please explain concisely whether or not a 7:1 split would benefit Apple
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