Question 1

Winslow Co.has 142,000 shares of stock outstanding at a market price of $52 a share.The company just announced a 5-for-3 stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

Number of shares = 142,000 × 5/3 = 236,667 shares

Question 2

Robinson's has 15,000 shares of stock outstanding with a par value of $1 per share and a market price of $25.50 a share.The balance sheet shows $15,000 in the common stock account,$325,000 in the capital in excess of par value account,and $189,000 in the retained earnings account.The firm just announced a 3-for-2 stock split.What will the market price per share be after the split?

Accepted Answer

Market price per share = $25.50 × 2/3 = $17.00

Question 3

Pete's Pets has 15,000 shares of stock outstanding with a par value of $1 per share and a market price of $26 a share.The balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par value account,and $189,000 in the retained earnings account.The firm just announced a 5-for-4 stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

Number of shares = 15,000 × 5/4 = 18,750 shares

Question 4

Auto Supply has 84,600 shares of stock outstanding with a par value of $1 per share and a market value of $6.30 a share.The company just announced a 2-for-7 reverse stock split.What will be the par value per share after the split?

Accepted Answer

Par value per share = $1 × 7/2 = $3.50

Question 5

You own 100 shares of MXR stock.The company plans on issuing a dividend of $.50 a share one year from today,$.85 a share two years from today,and then a final liquidating dividend of $12.60 a share three years from today.Your required rate of return on this stock is 16 percent.Ignoring taxes,what is the value of one share of this stock to you today?

Accepted Answer

Value per share = ($.50/1.16)+ ($.85/1.16²)+ ($12.60/1.16³)= $9.14

Question 6

Luis owns 800 shares of a stock that announced it will pay a special $3.30 per share dividend one year from today and a regular $.30 per share dividend two years from today.He does not desire any dividend income this year but does want the maximum available to him next year.He can earn 12 percent on his funds.Ignoring taxes,what will be his total homemade dividend in two years?

Accepted Answer

Homemade dividend = 800 × [($3.30 × 1.12)+ $.30] = $3,196.80

Question 7

A common stock is selling for $63 a share.The par value per share is $1 and the total market value of the firm is $94,500.How many shares of stock will be outstanding if the firm does a 3-for-1 stock split?

Accepted Answer

Number of shares = ($94,500/$63)× 3/1 = 4,500 shares

Question 8

The Uptowner has 6,000 shares of stock outstanding with a par value of $1 per share and a market value of $12 per share.The balance sheet shows $6,000 in the common stock account,$58,000 in the capital in excess of par value account,and $32,500 in the retained earnings account.The firm just announced a 55 percent (large)stock dividend.What is the value of the common stock account after the dividend?

Accepted Answer

Common stock = $6,000 + [(6,000 × .55)× $1] = $9,300

Question 9

Jensen's has 22,000 shares of stock outstanding with a par value of $1 per share and a market price of $20.60 a share.The balance sheet shows $22,000 in the common stock account,$325,000 in the capital in excess of par value account,and $189,000 in the retained earnings account.The firm just announced a 5-for-2 stock split.What will be the balance in the capital in excess of par value account after the split?

Accepted Answer

A stock split does not change the total value of the capital in excess of par value account.Post-split capital in excess of par value = Current value of $325,000

Question 10

Edie's has 14,500 shares of stock outstanding with a par value of $1 per share and a market value of $7.22 a share.The company just announced a 1-for-3 reverse stock split.What will be the value of the common stock account after the split?

Accepted Answer

A reverse stock split does not change the total value of the common stock account.Common stock account value = (14,500 × 1/3)× ($1 × 3/1)= $14,500

Question 11

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 $420,000.The balance sheet reflects current retained earnings of $84,400.The company just announced a 1-for-5 reverse stock split.What will the par value per share be after the split?

Accepted Answer

New par value = $1 × 5/1 = $5

Question 12

BJ's Auto Group has 25,000 shares of stock outstanding at a market price of $14.50 a share.What will be the market price per share if the company does a 2-for-5 reverse stock split?

Accepted Answer

Market price = $14.50 × 5/2 = $36.25

Question 13

The Health Store has 135,000 shares of stock outstanding with a par value of $1 per share and a market value of $5 a share.The company has retained earnings of $76,500 and capital in excess of par value of $340,000.The company just announced a 1-for-5 reverse stock split.How many shares of stock will be outstanding after the split?

Accepted Answer

Number of shares = 135,000 × 1/5 = 27,000 shares

Question 14

Robinson's has 18,500 shares of stock outstanding with a par value of $1 per share and a market price of $36 a share.The balance sheet shows $18,500 in the common stock account,$315,000 in the capital in excess of par value account,and $189,000 in the retained earnings account.The firm just announced a 3-for-2 stock split.What will be the value of the common stock account after the split?

Accepted Answer

A stock split does not change the total value of the common stock account.Common stock account value = (18,500 × 3/2)× ($1 × 2/3)= $18,500

Question 15

Men's Place has 15,000 shares of stock outstanding with a par value of $1 per share and a market value of $19.50 per share.The balance sheet shows $15,000 in the common stock account,$218,000 in the capital in excess of par value account,and $312,500 in the retained earnings account.The firm just announced a 50 percent (large)stock dividend.What is the market value per share after the dividend?

Accepted Answer

Total market value = 15,000 × $19.50 = $292,500New number of shares = 1.5 × 15,000 = 22,500 sharesNew market value per share = $292,500/22,500 = $13.00

Question 16

The Retail Outlet has 9,000 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $420,000.The balance sheet shows a balance in the capital in excess of par value of $136,000 and retained earnings of $234,000.The company just announced a 3-for-2 stock split.What will be the common stock account balance after the split?

Accepted Answer

A stock split does not change the total value of the common stock account.Common stock account value = (9,000 × 3/2)× ($1 × 2/3)= $9,000

Question 17

The Robert's Co.just paid an annual dividend of $3.22 a share.The firm has a target payout ratio of .75 and a speed of adjustment value of .8.What is the expected value of next year's annual dividend if the firm expects its earnings per share to be $6.33?

Accepted Answer

Div₁ = $3.22 + .8[(.75 × $6.33)- $3.22] = $4.44

Question 18

The Tinslow Co.has 65,000 shares of stock outstanding at a market price of $68 a share.The company just announced a 7-for-3 stock split.What will the market price per share be after the split?

Accepted Answer

Market price per share = $68 × 3/7 = $29.14

Question 19

Alpha Company is paying a $1.50 per share dividend today.There are 200,000 shares outstanding with a par value of $1 per share.As a result of this dividend,the:

Accepted Answer

Decrease in retained earnings = $1.50 × 200,000 = $300,000

Question 20

Fabric Outlet has 17,500 shares of stock outstanding with a par value of $1 per share.The current market value of the firm is $1,280,000.The balance sheet shows a balance of $142,000 in the capital in excess of par value account and retained earnings of $234,000.The company just announced a 5-for-3 stock split.What will be the market price per share after the split?

Accepted Answer

Market price per share = $1,280,000/(17,500 × 5/3)= $43.89

Quiz 16: Dividends and Other Payouts