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assignment__14.docx

Problem 14-1 Dividends and Stock Prices [LO 2]

Your portfolio is 200 shares of Sunny Morning, Inc. The stock currently sells for $90 per share. The company has announced a dividend of $2.10 per share with an ex-dividend date of April 19.

Required:

Assuming no taxes, how much will your stock be worth on April 19? (Do not include the dollar sign ($).)

  Stock value

$  

Problem 14-3 Dividends and Taxes [LO 2]

Palmer, Inc., has declared a $6.70 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 30 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Palmer sells for $118 per share, and the stock is about to go ex-dividend.

Required:

What do you think the ex-dividend price will be? (Do not include the dollar sign ($). Round your answer to 2 decimal places (e.g., 32.16).)

  Ex-dividend price

$  

Problem 14-4 Stock Dividends [LO 3]

The owners’ equity accounts for Trans World International are shown here:

  Common stock ($1 par value)

 

$

100,000

 

  Capital surplus

 

 

206,000

 

  Retained earnings

 

 

680,000

 

  Total owners’ equity

 

$

986,000

 

Requirement 1:

Assume Trans World stock currently sells for $32 per share and a 15 percent stock dividend is declared.

 

(a)

How many new shares will be distributed?

  New shares issued

 

(b)

Show the new balance for the equity accounts. (Do not include the dollar signs ($).)

  Common stock

 

$

 

  Capital surplus

 

 

 

  Retained earnings

 

 

 

 

  Total owners’ equity

 

$

 

 

 

Requirement 2:

Now assume that instead Trans World declares a 20 percent stock dividend.

 

(a)

How many new shares will be distributed?

 

  New shares issued

 

 

(b)

Show the new balance for the equity accounts. (Do not include the dollar signs ($).)

  Common stock

 

$

 

  Capital surplus

 

 

 

  Retained earnings

 

 

 

 

  Total owners’ equity

 

$

 

Problem 14-6 Stock Splits and Stock Dividends [LO 3]

Bermuda Triangle Corporation (BTC) currently has 370,000 shares of stock outstanding that sell for $100 per share. Assuming no market imperfections or tax effects exist.

 

Required:

Determine the share price and new number of shares outstanding if (Do not include the dollar signs ($). Round your price per share answers to 2 decimal places (e.g., 32.16) and other answers to the nearest whole number (e.g., 32).):

 

(a)

BTC has a five-for-three stock split.

 

  Price per share

 $  

  Shares outstanding

 

 

(b)

BTC has a 12 percent stock dividend.

 

  Price per share

 $  

  Shares outstanding

 

 

(c)

BTC has a 38.0 percent stock dividend.

 

  Price per share

 $  

  Shares outstanding

 

 

(d)

BTC has a four-for-seven reverse stock split.

 

  Price per share

 $  

  Shares outstanding

 

Requirement 1:

What effect will this transaction have on the equity of the firm? (Do not include the dollar sign ($). Input the amount as positive value.)

  Will shareholders’ equity by $

Requirement 2:

How many shares will be outstanding after the repurchase? (Round your answer to the nearest whole number (e.g., 32).)

  New shares outstanding

  

Requirement 3:

What will the price per share be after the repurchase? (Do not include the dollar sign ($). Round your answer to 2 decimal places (e.g., 32.16).)

  Share price

$   

Requirement 4:

Is the share repurchase effectively the same as a cash dividend?

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