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# The Determination of a Company's Stock Price

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Balance sheet for Levy Corp. is below in Market Value Terms. There are 6,000 shares of stock outstanding.
Cash 19,000 Equity 182,000
Fixed Assets 163,000

Total 182,000 Total 182,000

Company has declared a dividend of \$1.20 per share. Stock goes ex-dividend tomorrow. Ignoring tax effects, what is stock selling for today? What is it selling for tomorrow? What will the balance sheet look like after dividends are paid?

#### Solution Summary

This solution provides a balance sheet for Levy Corp.

\$2.19
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## Mr. William Profit is studying companies going public for the first time. He is particularly interested in the relationship between the size of the offering and the price per share. A sample of 15 companies that recently went public revealed the following information.

Mr. William Profit is studying companies going public for the first time. He is particularly interested in the relationship between the size of the offering and the price per share. A sample of 15 companies that recently went public revealed the following information.

Company Size (\$ millions), X Price per Share, Y Company Size (\$ millions), X Price per Share Y
1
9.0
10.8
9
160.7
11.3

2
94.4
11.3
10
96.5
10.6

3
27.3
11.2
11
83.0
10.5

4
179.2
11.1
12
23.5
10.3

5
71.9
11.1
13
58.7
10.7

6
97.9
11.2
14
93.8
11.0

7
93.5
11.0
15
34.4
10.8

8
70.0
10.7

Determine the regression equation.
Determine the coefficient of determination. Do you think Mr. Profit should be satisfied with using the size of the offering as the independent variable?

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