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1) According to Wall Street Journal (WSJ), there was wide-spread speculation in February 2013 that Apple, Inc. (AAPL) would proclaim 2-for-1 stock split quickly. Some large stock holders of Apple in addition to some analysts and traders believe that 2-for-1 stock split would absolutely benefit its present shareholders and increase the overall market value of firm. 2:1 split would double number of outstanding shares and half earnings and dividends per share, thus lowering stock price. From a merely technical viewpoint, a 2:1 stock split just provides added pieces of paper and must not influence overall wealth of shareholders (shares doubles, prices drop one-half). So you are confused why some traders, shareholders, and analysts adamantly believe that 2:1 split will advantage Apple’s shareholders. Describe in a few words whether or not 2:1 split would advantage Apple’s present shareholders with at least a 2-year investment (holding) horizon. You would wish to utilize your understanding stock split material, particularly the signalling aspects of stock splits, past empirical evidence, optimal stock price range theory, and round lot stock purchase arguments, in your description. Your answers should not be more than ten sentences.

Basic Finance, Finance

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