Nu Tech is a technology firm with good growth prospects.The firm wishes to do something to acknowledge the loyalty of its shareholders but needs all its available cash to fund its rapid growth.The market price of its stock is currently trading in the upper end of its preferred trading range.The firm could consider:

Question

Quizplus · Accepted Answer

A stock dividend would allow Nu Tech to acknowledge the loyalty of its shareholders without using all of its available cash. This option would allow the firm to issue additional shares to current shareholders as a form of dividend, which would increase the number of shares outstanding while maintaining the proportional ownership of each shareholder. This would also help to keep the market price of the stock in its preferred trading range, as more shares would be available for trading. A liquidating dividend, extra cash dividend, or cash distribution would all require the use of the firm's available cash, which could hinder its growth prospects. A reverse stock split would not provide any benefits to shareholders and could potentially decrease the liquidity of the stock.

Nu Tech Is a Technology Firm with Good Growth Prospects