9 Questions
ealhazmi
problems_9.docxProblem 17-1 Dividends and Taxes [LO2]
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Dark Day, Inc., has declared a $5.60 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Dark Day sells for $94.10 per share, and the stock is about to go ex-dividend. |
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What do you think the ex-dividend price will be? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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Ex-dividend price |
$ |
Problem 17-2 Stock Dividends [LO3]
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The owners’ equity accounts for Alexander International are shown here: |
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Common stock ($0.60 par value) |
$ |
45,000 |
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Capital surplus |
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340,000 |
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Retained earnings |
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748,120 |
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Total owners’ equity |
$ |
1,133,120 |
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a-1 |
If Alexander stock currently sells for $30 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? |
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New shares issued |
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a-2 |
Show how the equity accounts would change. |
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Common stock |
$ |
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Capital surplus |
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Retained earnings |
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Total owners’ equity |
$ |
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b-1 |
If instead Alexander declared a 20 percent stock dividend, how many new shares will be distributed? |
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New shares issued |
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b-2 |
Show how the equity accounts would change. (Negative amount should be indicated by a minus sign.) |
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Common stock |
$ |
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Capital surplus |
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Retained earnings |
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Total owners’ equity |
$ |
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Problem 17-3 Stock Splits [LO3]
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The owners' equity accounts for Alexander International are shown here. |
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Common stock ($0.50 par value) |
$ |
35,000 |
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Capital surplus |
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320,000 |
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Retained earnings |
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708,120 |
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Total owners’ equity |
$ |
1,063,120 |
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a-1 |
If Alexander declares a five-for-one stock split, how many shares are outstanding now? |
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New shares outstanding |
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a-2 |
What is the new par value per share? (Round your answer to 3 decimal places. (e.g., 32.161)) |
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New par value |
$ per share |
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b-1 |
If Alexander declares a one-for-seven reverse stock split, how many shares are outstanding now? |
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New shares outstanding |
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b-2 |
What is the new par value per share? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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New par value |
$ per share |
Problem 17-4 Stock Splits and Stock Dividends [LO3]
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Red Rocks Corporation (RRC) currently has 485,000 shares of stock outstanding that sell for $40 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: |
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a. |
RRC has a four-for-three stock split? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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New share price |
$ |
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b. |
RRC has a 15 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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New share price |
$ |
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c. |
RRC has a 54.5 percent stock dividend? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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New share price |
$ |
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d. |
RRC has a two-for-seven reverse stock split? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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New share price |
$ |
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Determine the new number of shares outstanding in parts (a) through (d). |
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a. |
New shares outstanding |
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b. |
New shares outstanding |
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c. |
New shares outstanding |
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d. |
New shares outstanding |
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Problem 17-5 Regular Dividends [LO1]
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The balance sheet for Chevelle Corp. is shown here in market value terms. There are 8,000 shares of stock outstanding. |
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Market Value Balance Sheet |
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Cash |
$ |
44,400 |
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Equity |
$ |
424,400 |
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Fixed assets |
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380,000 |
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Total |
$ |
424,400 |
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Total |
$ |
424,400 |
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The company has declared a dividend of $1.20 per share. The stock goes ex dividend tomorrow. |
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Ignoring any tax effects, what is the stock selling for today? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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Stock selling price |
$ per share |
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Ignoring any tax effects, what will it sell for tomorrow? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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Stock selling price |
$ per share |
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Ignoring any tax effects, what will the balance sheet look like after the dividends are paid? |
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Balance Sheet |
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Cash |
$ |
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Equity |
$ |
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Fixed assets |
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Total |
$ |
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Total |
$ |
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Problem 17-6 Share Repurchase [LO4]
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The balance sheet for Chevelle Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. |
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Market Value Balance Sheet |
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Cash |
$ |
45,100 |
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Equity |
$ |
495,100 |
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Fixed assets |
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450,000 |
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Total |
$ |
495,100 |
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Total |
$ |
495,100 |
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Instead of a dividend of $1.40 per share, the company has announced a share repurchase of $7,000 worth of stock. |
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How many shares will be outstanding after the repurchase? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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Shares outstanding |
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What will the price per share be after the repurchase? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
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New stock price |
$ |
Problem 17-7 Stock Dividends [LO3]
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The market value balance sheet for Sci-Fi Crimes Manufacturing is shown here. Sci-Fi Crimes has declared a 15 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend). |
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Market Value Balance Sheet |
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Cash |
$ |
83,000 |
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Debt |
$ |
142,000 |
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Fixed assets |
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670,000 |
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Equity |
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611,000 |
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Total |
$ |
753,000 |
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Total |
$ |
753,000 |
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There are 18,000 shares of stock outstanding. What is the current share price? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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New stock price |
$ per share |
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What will the ex-dividend price be? (Round your answer to 2 decimal places. (e.g., 32.16)) |
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Ex-dividend price |
$ |
Problem 17-8 Stock Dividends [LO3]
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The company with the common equity accounts shown here has declared a 15 percent stock dividend when the market value of its stock is $39 per share. |
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Common stock ($1 par value) |
$ |
445,000 |
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Capital surplus |
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858,000 |
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Retained earnings |
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3,840,800 |
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Total owners' equity |
$ |
5,143,800 |
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What would be the number of shares outstanding, after the distribution of the stock dividend? |
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New shares outstanding |
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What would the equity accounts be after the stock dividend? |
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Common stock |
$ |
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Capital surplus |
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Retained earnings |
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Total owners' equity |
$ |
Problem 17-10 Homemade Dividends [LO2]
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You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.60 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $75 per share. The required return on Avondale stock is 20 percent. |
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Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) |
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Share price |
$ |
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If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) |
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Number of shares |
$ |
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What would your cash flow be for each year for the next two years? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations.) |
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Cash flow |
$ |
