According to the Wall Street Journal (WSJ), there was a wide-spread speculation in February

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Q#1.
According to the Wall Street Journal (WSJ), there was a wide-spread speculation
in February 2013 that Apple, Inc. (AAPL) would announce a 2-for-1 stock split
soon. Some of Apple’s large stock holders as well as some analysts and traders
believe that a 2-for-1 stock split would definitely benefit its current
shareholders and raise the firm’s overall market value. You read in chapter 14
that a 2:1 split would double the number of outstanding shares and half the
earnings and dividends per share, thereby lowering the stock price. From a
purely technical perspective, a 2:1 stock split simply provides additional
pieces of paper and should not affect the overall wealth of shareholders
(shares doubles, prices drop one-half). So you are puzzled why some shareholders,
traders, and analysts adamantly believe that a 2:1 split will benefit Apple’s
shareholders. Please explain concisely whether or not a 2:1 split would benefit
Apple’s current shareholders with at least a 2-year investment (holding)
horizon. You would want to use your understanding of chapter 14 stock split
material, especially the signalling aspects of stock splits, optimal stock
price range theory, past empirical evidence, and round lot stock purchase
arguments, in your explanation. Limit your answers to no more than ten (10)
sentences.

Q#2.
After the severe 2008 stock market crash, an increasing number of publicly
traded firms announced stock buyback (repurchase) programs. Please explain what
benefits or rationale, if any, firms see in stock repurchases when their prices
are down and how would investors react to these repurchase programs. You would
want to use your understanding of chapter 14 stock repurchase discussion in
your answers. Limit your answers to no more than ten (10) sentences.

Q#3.
The M& M capital structure theories in chapters 15 and 26 persuasively
argue that the optimal debt is not a 0.0 % debt to equity ratio (i.e., no
debt). Table 15-1 (page 603 of text) shows that, consistent with M&M
theories, the average long-run debt to equity ratio in many different
industries ranges from 23% to 177%. Yet some technology firms, such as Microsoft,
Google, and Apple, do not use any long-term debt or almost 0.0% LT debt. Please
explain whether it makes financial sense for such firms to use no debt. You
would want to use your understanding of capital structure material in chapter
15, especially signalling and asymmetric information theories, in your answers.
Limit your answers to no more than ten (10) sentences.

Q#4.
Finance research has shown that managers of actually managed mutual funds or
exchange traded funds (ETF), on average, do not outperform the overall stock
market as measured by the S&P 500 index (Page 293 of your book). In some
years, more than 80% of fund managers were unable to beat the overall stock
market. The year 2013 is a good example when the S&P 500 yielded nearly 29%
return, which was better than the average return on all actively managed stock portfolios
with similar risk. (a) If you believe these results which seem to support
informational efficiency of equity markets in U.S., what would be your
investment strategy so that your average long-run returns are better than the
returns realized by more than 50% of professional money managers of actively
traded funds. Explain. (b) If equity markets are efficient and rational to a
larger extent, how would you explain the stock market bubbles of 2000 and 2008
in the presence of efficient markets. Please limit your answers to no more than
twenty (20) sentences.

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