1 The common stock of Margot, Inc. is selling for $63 a share. The par value per share is $1. Currently, the firm has a total market value of $94,500. How many shares of stock will be outstanding if the firm does a 2-for-1 stock split?
A. 800 shares
B. 1,200 shares
C. 3,000 shares
D. 3,600 shares
E. 4,800 shares
2 Murphy’s, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the market price per share be after the dividend?
A. $7.20
B. $7.27
C. $7.33
D. $8.00
E. $8.80
3 The KatyDid Co. is paying a $1.25 per share dividend today. There are 120,000 shares outstanding with a par value of $1.00 per share. As a result of this dividend, the:
A. retained earnings will decrease by $150,000.
B. retained earnings will decrease by $120,000.
C. common stock account will decrease by $150,000.
D. common stock account will decrease by $120,000.
E. capital in excess of par value account will decrease by $120,000.
4 You own 300 shares of Abco, Inc. stock. The company has stated that it plans on issuing a dividend of $.60 a share one year from today and then issuing a final liquidating dividend of $2.20 a share two years from today. Your required rate of return is 10%. Ignoring taxes, what is the value of one share of this stock today?
A. $2.36
B. $2.40
C. $2.62
D. $2.80
E. $2.85
5 A firm has a market value equal to its book value. Currently, the firm has excess cash of $800 and other assets of $5,200. Equity is worth $6,000. The firm has 600 shares of stock outstanding and net income of $700. 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?
A. 480 shares
B. 500 shares
C. 520 shares
D. 540 shares
E. 560 shares
6. Stock Splits and Stock Dividends Roll Corporation currently has 220,000 shares of stock outstanding that sell for $82 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:
a. RC has a five-for-two stock split?
b. RC has a 18 percent stock dividend?
c. RC has a 43 percent stock dividend?
d. RC has a three-for-seven reverse stock split?
e. Determine the new number of shares outstanding in parts (a) through (d)
7. Stock Dividends The company with the common equity accounts shown here has declared a 12 percent stock dividend at a time when the market value of its stock is $44 per share. What effects on the equity accounts will the distribution of the stock dividend have?
Common stock ($1 par value) $165,000
Capital Surplus $1,512,000
Retained earnings $2,865,000
Total owners’ equity $4,542,000
Suppose the company instead decides on a five-for-one stock split. The firm’s 80-cent per share cash dividend on the new (post-split) shares represents an increase of 10% over last year’s dividend on the pre-split stock. What effect does this have on the equity accounts? What was last year’s dividend per share?
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