Purchase Solution

# Equity Accounts and Stock Dividends

Not what you're looking for?

19-2: EXCEL: Stock Dividends: The owners' equity accounts for Hexagon International are shown here:
Common stock (\$1 par value) \$20,000
Capital surplus 210,000
Retained earnings 735,300
Total owners' equity \$965,300

a. If Hexagon stock currently sells for \$48 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.

b. If Hexagon declared a 25 percent stock dividend, how would the accounts change?
________________________________________

19-4: EXCEL: Stock Splits and Stock Dividends. Roll Corporation (RC) currently has 260,000 shares of stock outstanding that sell for \$78 per share. Assuming no market imperfections or tax effects exist, what will the share price be after:

a. RC has a five-for-three stock split?
b. RC has a 15 percent stock dividend?
c. RC has a 42.5 percent stock dividend?
d. RC has a four-for-seven reverse stock split?
________________________________________

20-5: The St. Anger Corporation needs to raise \$35 million to finance its expansion into new markets. The company will see new shares of equity via a general cash offering to raise the needed funds. If the offer price is \$31 per share and the company's underwriters charge an 8 percent spread, how many shares need to be sold?
________________________________________

20-6: EXCEL: Calculating Flotation Costs: In the previous problem if the SEC filing fee and associated administrative expenses of the offering are \$900,000, how many shares need to be sold?
________________________________________

21-7: EXCEL: Super Sonics Entertainment is considering buying a machine that costs \$435,000. The machine will be depreciated over five years by the straight-line method and will be worthless at that time. The company can lease the machine with year-end payments of \$107,500. The company can issue bonds at a 9 percent interest rate. If the corporate tax rate is 35 percent, should the company buy or lease?

##### Solution Summary

This posting shows how the equity accounts would change.

Solution provided by:
###### Education
• MBA, Indian Institute of Finance
###### Recent Feedback
• "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
• "thank you!"
• "Thank you again Jayant. You are super fast. "
• "Thank you Jayant. You are appreciated. "
• "Again, thank you Jayant. You are wonderful. "

##### Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

##### SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.