For 20 years, Bass Products Corporation, a public corporation, has followed the practice of paying a cash dividend every quarter and has promoted…

For 20 years, Bass Products Corporation, a public corporation, has followed the practice of paying a cash dividend every quarter and has promoted itself to investors as a stable, reliable company. Recent competition from Asian companies has negatively affected its earnings and cash flows. As a result, Sandra Bass, president of the company, is proposing that the board of directors declare a stock dividend of 5% this year instead of a cash dividend. She says, “This will maintain our consecutive dividend record and will not require any cash outflow.”

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