Capital payout and raising policies

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A company conducts the following capital payout and raising policies. Assume that there are no taxes, no signalling effects and no transaction costs.

Which one of the following statements is NOT correct?

a. 25% stock buy-back will decrease the number of shares by 25%.

b.1 for 5 bonus issue will increase the number of shares by 20% and decrease the share price by 16.67%.

c. 4 for 3 stock split will increase the number of shares by 33.33% and decrease the share price by 25%.

d. 1 for 8 rights issue at a subscription price of $6 when the pre-announcement stock price was $9, will increase the number of shares by 12.5% and decrease the share price by 4.44%.

e. After cash dividend, normally the share price will fall.

Reference no: EM133061431

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