Question 1

KLT just paid an annual dividend of $1.62 a share.The firm has a target payout ratio of 0.55 and a speed of adjustment value of 0.4.What is the expected value of next year's annual dividend if the firm expects its earnings per share to be $3.98?

Accepted Answer

Div₁ = $1.62 + 0.4[(0.55 × $3.98)− $1.62] = $1.85

Question 2

Bruno's has 13,000 shares of stock outstanding with a par value of $1 per share and a market value of $38.29 per share.The balance sheet shows $13,000 in the common stock account,$78,300 in the capital in excess of par value account,and $82,500 in retained earnings.The firm just announced a large stock dividend of 40 percent.What will be the balance in the capital in excess of par value account after the dividend?

Accepted Answer

The answer of Bruno's has 13,000 shares of stock outstanding...

Question 3

Jensen's has 18,000 shares of stock outstanding with a par value of $1 per share and a market price of $32.30 a share.The balance sheet shows $18,000 in the common stock account,$109,600 in the capital in excess of par value account,and $78,200 in the retained earnings account.The firm just announced a stock split of five-for-three.What will be the balance in the capital in excess of par value account after the split?

Accepted Answer

A stock split does not affect the capital in excess of par value account. The balance remains the same at $109,600.

Question 4

Robinson's has 12,000 shares of stock outstanding with a par value of $1 per share and a market price of $24.20 a share.The firm just announced a four-for-three stock split.What will the market price per share be after the split?

Accepted Answer

Market price per share = $24.20 × 3/4 = $18.15

Question 5

AJ's has 12,400 shares of stock outstanding with a par value of $1 per share and a market price of $31 a share.The balance sheet shows $12,400 in the common stock account,$67,200 in the capital in excess of par value account,and $59,300 in the retained earnings account.The firm just announced an upcoming five-for-four stock split.What will be the value of the common stock account after the split?

Accepted Answer

The answer of AJ's has 12,400 shares of stock outstanding...

Question 6

The Robert's Co.just paid an annual dividend of $1.49 a share.The firm has a target payout ratio of 0.38 and a speed of adjustment value of 0.7.What is the expected value of next year's annual dividend if the firm expects its earnings per share to be $4.87?

Accepted Answer

Div₁ = $1.49 + 0.7[(0.38 × $4.87)− $1.49)= $1.74

Question 7

A stock currently sells for $65.70 a share.What type of stock split would be best if the stock's proper trading range centers on $22 a share?

Accepted Answer

If the proper trading range centers on $22 a share, then a three-for-one stock split would bring the price down to $21.90 a share, which is close to the desired range. Additionally, a three-for-one split is a common and straightforward split.

Question 8

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $120,000.The company just announced a one-for-three reverse stock split.What will the par value per share be after the split?

Accepted Answer

New par value = $1 × 3/1 = $3

Question 9

The Uptowner has 11,000 shares of stock outstanding with a par value of $1 per share and a market value of $14 per share.The balance sheet shows $11,000 in the common stock account,$60,300 in the capital in excess of par value account,and $72,100 in the retained earnings account.The firm just announced a large stock dividend of 65 percent.What is the value of the common stock account after the dividend?

Accepted Answer

Common stock = $11,000 + (11,000 × 0.65 × $1)= $18,150

Question 10

Auto Supply has 54,200 shares of stock outstanding with a par value of $1 per share and a market value of $6.20 a share.The company just announced a two-for-nine reverse stock split.What will be the par value per share after the split?

Accepted Answer

Par value per share = $1 × 9/2 = $4.50

Question 11

Edie's has 14,500 shares of stock outstanding with a par value of $1 per share and a market value of $5.80 a share.What type of stock split would be best if the stock's proper trading range centers on $16 a share?

Accepted Answer

The answer of Edie's has 14,500 shares of stock outstanding...

Question 12

Pete's Pets has 18,500 shares of stock outstanding with a par value of $1 per share and a market price of $21 a share.The firm just announced a three-for-two stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

Number of shares = 18,500 × 3/2 = 27,750 shares

Question 13

Corner Mart has 130,000 shares of stock outstanding with a par value of $1 per share and a market value of $38.40 per share.The firm just announced a small stock dividend of 15 percent.What will be the market price per share after the dividend?

Accepted Answer

Market price per share = $38.40 / 1.15 = $33.39

Question 14

Pluto's has 15,300 shares of stock outstanding with a par value of $1 per share and a market value of $22.10 per share.The balance sheet shows $324,800 in the capital in excess of par account,$15,300 in the common stock account,and $174,700 in the retained earnings account.The firm just announced a small stock dividend of 12 percent.What will be the balance in the retained earnings account after the dividend?

Accepted Answer

Retained earnings = $174,700 − (15,300 × 0.12 × $22.10)= $134,124.40

Question 15

Cat's has 41,800 shares of stock outstanding with a par value of $1 per share and a market value of $13.57 per share.The balance sheet shows $41,800 in the common stock account,$247,900 in the capital in excess of par value account,and $308,500 in retained earnings.The firm just announced a large stock dividend of 50 percent.What is the value of the retained earnings account after the dividend?

Accepted Answer

Retained earnings = $308,500 − (41,800 × 0.50 × $1)= $287,600

Question 16

You currently own 300 shares of Hanover Co.The stock closed at a price of $32.09 a share today.Tomorrow morning,a stock dividend of 8 percent will occur.What will be the change in the value of your investment tomorrow assuming there are no other factors affecting the market price of the stock?

Accepted Answer

A stock dividend increases the number of shares you own but does not change the total value of your investment. The price per share will adjust to reflect the dividend, so the overall value remains the same.

Question 17

The Retail Outlet has 17,500 shares of stock outstanding with a par value of $1 per share.The current book value of the firm is $387,800 and the balance in the capital in excess of par value account is $146,300.The company just announced a four-for-three stock split.What will be the common stock account balance after the split?

Accepted Answer

The answer of The Retail Outlet has 17,500 shares of...

Question 18

Winslow Co.has 74,200 shares of stock outstanding at a market price of $52 a share.The company just announced a five-for-two stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

Number of shares = 74,200 × 5/2 = 185,500

Question 19

Men's Place has 21,000 shares of stock outstanding with a par value of $1 per share and a market value of $27.18 per share.The balance sheet shows $21,000 in the common stock account,$187,600 in the capital in excess of par value account,and $218,200 in the retained earnings account.The firm just announced a large stock dividend of 35 percent.What is the market value per share after the dividend?

Accepted Answer

New market value per share = $27.18 / 1.35 = $20.13

Quiz 16: Dividends and Other Payouts