alleryStart learning →What does a stock dividend do to the company's market capitalization?
AIt raises it
BIt lowers it
CIt leaves it as is
DIt doubles it
Answer & Solution
Correct answer: C. It leaves it as is
Share count rises but value per share falls, so total market capitalization is unchanged.
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Related questions
Which limits can restrict how much a firm may distribute as dividend?Why might management avoid changing dividend policy abruptly?Which alternative to cash dividends may a firm choose when surplus cash exists?Which type of shareholder usually prefers earnings to be retained?With no NPV-positive projects and surplus cash, what should management do?Management knowing more than the market is called what?If dividends bear higher tax than gains, raising them does what to value?Per the Modigliani-Miller theorem, dividend policy has what effect on firm value?