Essay on Georgia Atlantic Company
Georgia Atlantic Company
The purpose of this case is to have students examine dividend policy--cash dividends, stock splits, and stock dividends--from the viewpoint of its effect on corporate share prices.
About one and a half hours of student preparation. If the case is to be written up and handed in, double the time required.
This case can be used in several ways. In the introductory course, the case can be used as the basic structure for a lecture or as a written assignment in conjunction with lecture and text material. In our more advanced courses, which usually have smaller enrollments, …show more content…
High priced stocks such as Georgia Atlantic's are not attractive to all investors because many cannot afford to trade in round lots of 100 shares for which the commission costs are lower. Georgia Atlantic's very high price per share is far above the range that most people on Wall Street would say is optimal. To maximize the value of the firm's shares, Wall Street people often say that a stock's price should fall in the range between $20 and $80. A stock split would probably be advisable to move the price of Georgia Atlantic's shares somewhat closer to the range that is considered optimal.
There are people who would argue with this position (but not many). The counter argument is the one expressed by Junior based on commission costs. That argument might have been valid years ago, but today