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Stock rights, dividends, value of right, EPS after dividend

3) A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and net income of $900. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?

4) The Wordsmith Corporation has 10,000 shares outstanding at $30 each. They expect to raise $150,000 by a rights offering with a subscription price of $25. How many rights must you turn in to get a new share?

5) Assuming everything else is constant, if a stock's old price is $25 and the ex-rights or new stock price is $19, then how much is the value of the right?

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1. Earnings per share = Net Income/Number of shares outstanding
EPS = 900/200 = $4.50
Payment of cash dividend would affect the market price of the firm but ...

Solution Summary

The solution explains questions relating to stock rights, dividends, value of the right and EPS after dividend is paid