Menomonie Publishing
Menomonie Publishing stock currently sells for $40 per share. The company has 1,200,000 shares outstanding. What would be the effect on the number of shares outstanding and on the stock price of the following?
*15% Stock Dividend
*4-for-3 Stock Split
*Reverse 3-for-1 Stock Split
Last year both Hudson Homes and Baldwin Construction earned $1 million in net income. Both companies have assets of $10 million. Hudson generated a return on equity of 11.1%, whereas Baldwin produced a return on equity of 20.0%. What can explain the differences in return on equity between the two companies?
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The response addresses the queries posted in 479 words with references.
// The dividend policy affects market value of the shares. It depends on the organization policy which option of dividend is adopted by the firm. Under below paragraph, we will discuss about effect of different dividend options on market capitalization of the company.//
The current stock price of the Menomonie publishing is $40. The numbers of outstanding shares are 1,200,000. Thus the total market capitalization will be computed as follow:
Market Capitalization = Market price of shares *Outstanding Shares
Market Capitalization = $40*1200000 = $48,000,000 (Ross, Westerfield & Jordan, 2008).
The relationship between outstanding shares and market price is that with the increase in the outstanding shares, ...
Solution Summary
The response addresses the queries posted in 479 words with references.