Question 1

SesameSweet Inc. has 220,000 shares outstanding with a market price of $12 per share. On the balance sheet, common stock is $760,000, and retained earnings are $275,000. There are no transactions costs.

Suppose SesameSweet declares a 3-for-1 stock split. If you owned 750 shares before the split, how many do you own after the split?

Accepted Answer

The answer of SesameSweet Inc. has 220,000 shares outstanding with...

Question 2

Surf City has decided on a 1-for-5 reverse stock split. If the firm currently has 20,000,000 shares outstanding, how many shares will be outstanding after the stock split?

Accepted Answer

In a 1-for-5 reverse stock split, every 5 shares are combined into 1 share. Therefore, the number of shares after the split will be 20,000,000 / 5 = 4,000,000 shares.

Question 3

Ramon's has 21,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $27 a share. The firm just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

A 5-for-3 stock split means for every 3 shares, shareholders will receive 5 shares. Therefore, the number of shares after the split will be (21,000 shares * 5/3) = 35,000 shares.

Question 4

BDJ, Inc. has 31,000 shares of stock outstanding with a market price of $15 per share. If net income for the year is $155,000 and the dividend per share is $2, what is the retention ratio for BDJ, Inc.?

Accepted Answer

The answer of BDJ, Inc. has 31,000 shares of stock...

Question 5

The ex-dividend date is _____ business days before the date of record.

Accepted Answer

The ex-dividend date is typically set for 2 business days before the date of record. This is to accommodate the standard settlement period for stock transactions, which is T+2 (trade date plus two business days).

Question 6

Alfredo Ltd of Ottawa firm has a market value equal to its book value. Currently, the firm has excess cash of $1,360 and other assets of $6,640. Equity is worth $8,000. The firm has 500 shares of stock outstanding and net income of $600. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?

Accepted Answer

The answer of Alfredo Ltd of Ottawa firm has a...

Question 7

Edie's Health and Beauty Supply has 125,000 shares of stock outstanding with a book value of $1.75 per share and a market value of $5 per share. The company has retained earnings of $76,500. The company just announced a 1-for-5 reverse stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

In a 1-for-5 reverse stock split, for every 5 shares that an investor holds, they are combined into 1 share. Therefore, to find the new number of shares outstanding, you divide the original number of shares (125,000) by 5. This results in 25,000 shares outstanding after the split.

Question 8

Xilo Corporation has decided on a 20% stock dividend. If the firm currently has 900,000 shares outstanding, how many shares will be outstanding after the stock dividend?

Accepted Answer

A 20% stock dividend on 900,000 shares means that shareholders will receive an additional 20% of their current holdings, which is 180,000 shares (20% of 900,000). Adding these to the original 900,000 shares results in a total of 1,080,000 shares outstanding.

Question 9

Delta, Inc. has 420,000 shares outstanding at a market price of $33.00 a share. If the company declares a 3-for-2 stock split, they will have ____ shares outstanding at a market price of:

Accepted Answer

In a 3-for-2 stock split, for every 2 shares an investor holds, they receive 3 shares. This increases the number of shares by a factor of 1.5 (3 divided by 2). Therefore, 420,000 shares become 630,000 shares (420,000 * 1.5). The market price adjusts inversely to the split ratio, so the new price is $33.00 divided by 1.5, which equals $22.00.

Question 10

The common stock of Gleason, Inc. is selling for $55 a share. The par value per share is $1. Currently, the firm has a total market value of $195,250. How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?

Accepted Answer

The answer of The common stock of Gleason, Inc. is...

Question 11

Circus City has decided on a 4-for-1 stock split. If the firm currently has 800,000 shares outstanding, how many shares will be outstanding after the stock split?

Accepted Answer

In a 4-for-1 stock split, each existing share is split into 4 shares. Therefore, if Circus City has 800,000 shares outstanding, after the split, it will have 800,000 * 4 = 3,200,000 shares outstanding.

Question 12

Kurt's Adventures has a debt-equity ratio of 3. Earnings for next year are estimated at $30,000. Capital spending is estimated at $100,000 for next year. If the company follows a residual dividend policy, what is the estimated dividend payout ratio?

Accepted Answer

The residual dividend policy states that dividends are paid out of the residual earnings after capital spending. In this case, earnings are $30,000 and capital spending is $100,000. Therefore, the residual earnings are $30,000 - $100,000 = -$70,000. Since the residual earnings are negative, no dividends will be paid out. Therefore, the dividend payout ratio is 0%.

Question 13

The last date on which you can purchase shares of stock and still receive the dividend is the date _____ business days prior to the date of record.

Accepted Answer

The correct answer is C because the ex-dividend date is typically three business days prior to the date of record.

Question 14

NeptBune, Inc. has 175,000 shares of stock outstanding at a market price of $59 a share. The company has just announced a 3-for-2 stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

In a 3-for-2 stock split, for every 2 shares an investor holds, they receive 3 shares. Therefore, the number of shares after the split is calculated as (175,000 shares * 3) / 2 = 262,500 shares.

Question 15

Philip's Garage has 25,000 shares of stock outstanding with a market price of $47 per share. The balance sheet shows $211,500 in the common stock account and $211,400 in the retained earnings account. The firm just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

A 5-for-3 stock split means that for every 3 shares currently held, shareholders will receive 5 shares. Therefore, the number of shares after the split will be (25,000 shares * 5/3) = 41,667 shares.

Question 16

Mae's Housewares has 48,000 shares of stock outstanding with a market value of $11 per share. The company has retained earnings of $62,700. The company just announced a 1-for-3 reverse stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

In a 1-for-3 reverse stock split, for every 3 shares an investor holds, they are consolidated into 1 share. Therefore, to find the new number of shares outstanding, divide the original number of shares (48,000) by 3, which equals 16,000 shares.

Question 17

Merrilee owns 500 of the 50,000 outstanding shares of TJ's Candies. The stock is currently valued at $30 per share. TJ's is considering either a $5 special dividend or a stock repurchase. How many shares would TJ's need to repurchase if the goal is to spend an amount equivalent to the total cost of the special dividend?

Accepted Answer

The total cost of the special dividend would be $5 per share times 50,000 shares, which equals $250,000. To spend an equivalent amount on a stock repurchase, TJ's would need to divide the total amount ($250,000) by the current stock price ($30 per share), resulting in approximately 8,333 shares (250,000 / 30 = 8,333.33).

Question 18

MDM has a D/E ratio of.5, a P/E of 10, and $50,000 in outstanding debt. The debt is selling at par and the shares of stock are selling at $25 a share. How many shares of stock will be outstanding after MDM completes a $25,000 share repurchase program?

Accepted Answer

MDM has $50,000 in debt and a D/E ratio of 0.5, meaning equity is $100,000. At $25 per share, there are 4,000 shares outstanding. Repurchasing $25,000 worth of shares at $25 each means buying back 1,000 shares, leaving 3,000 shares outstanding.

Question 19

BDJ, Inc. has 31,000 shares of stock outstanding with a market price of $15 per share. If net income for the year is $155,000 and the retention ratio is 80%, what is the dividend yield on BDJ Inc.'s stock?

Accepted Answer

The answer of BDJ, Inc. has 31,000 shares of stock...

Question 20

Ryan's Auto Parts has 200,000 shares of stock outstanding with a par value of $1 per share and a market value of $10 a share. The company has retained earnings of $86,000 and paid in surplus of $285,000. The company just announced a 2-for-5 reverse stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

In a 2-for-5 reverse stock split, for every 5 shares that an investor holds, they are consolidated into 2 shares. Therefore, to find the new number of shares outstanding, you divide the original number of shares (200,000) by 5 and then multiply by 2: (200,000 / 5) * 2 = 80,000 shares.

Quiz 17: Dividends and Dividend Policy

Surf City has decided on a 1-for-5 reverse stock split. If the firm currently has 20,000,000 shares outstanding, how many shares will be outstanding after the stock split?

Ramon's has 21,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $27 a share. The firm just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split?

BDJ, Inc. has 31,000 shares of stock outstanding with a market price of $15 per share. If net income for the year is $155,000 and the dividend per share is $2, what is the retention ratio for BDJ, Inc.?

The ex-dividend date is _____ business days before the date of record.

Xilo Corporation has decided on a 20% stock dividend. If the firm currently has 900,000 shares outstanding, how many shares will be outstanding after the stock dividend?

Delta, Inc. has 420,000 shares outstanding at a market price of $33.00 a share. If the company declares a 3-for-2 stock split, they will have ____ shares outstanding at a market price of:

The common stock of Gleason, Inc. is selling for $55 a share. The par value per share is $1. Currently, the firm has a total market value of $195,250. How many shares of stock will be outstanding if the firm does a 5-for-2 stock split?

Circus City has decided on a 4-for-1 stock split. If the firm currently has 800,000 shares outstanding, how many shares will be outstanding after the stock split?

Kurt's Adventures has a debt-equity ratio of 3. Earnings for next year are estimated at $30,000. Capital spending is estimated at $100,000 for next year. If the company follows a residual dividend policy, what is the estimated dividend payout ratio?

The last date on which you can purchase shares of stock and still receive the dividend is the date _____ business days prior to the date of record.

NeptBune, Inc. has 175,000 shares of stock outstanding at a market price of $59 a share. The company has just announced a 3-for-2 stock split. How many shares of stock will be outstanding after the split?

Mae's Housewares has 48,000 shares of stock outstanding with a market value of $11 per share. The company has retained earnings of $62,700. The company just announced a 1-for-3 reverse stock split. How many shares of stock will be outstanding after the split?

MDM has a D/E ratio of.5, a P/E of 10, and $50,000 in outstanding debt. The debt is selling at par and the shares of stock are selling at $25 a share. How many shares of stock will be outstanding after MDM completes a $25,000 share repurchase program?

BDJ, Inc. has 31,000 shares of stock outstanding with a market price of $15 per share. If net income for the year is $155,000 and the retention ratio is 80%, what is the dividend yield on BDJ Inc.'s stock?