10) 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.
a) What will the balance in the retained earnings account be after the dividend?
b) What will the market price per share be after the dividend?
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Please see the attached Excel 97-2003 spreadsheet for format and formulas.
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 ...
This solution illustrates how to compute the balance in retained earnings after a stock dividend has been declared and paid, and the effect of that dividend on the market price per share.
Finance: Payout, Dividends, Price, Income and Balance Sheets
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P16-7 Eliza Doolittle, the chief financial officer of East West Communications Corporations, has identified $14 million worth of new capital projects that the company should invest in next year. The optimal capital structure for the company is 40% debt and 60% equity. If the expected earnings for this year are $10 million, what amount of dividend should she recommend according to residual theory?
P16-8 Use the same data given in problem 16-7. Now what would be the amount of dividends that could be paid if East West's net income for this year is:
a. $16 million?
b. $6 million?
P16-10 Jan Brady, chief accountant of Mulberry Silk Products, is trying to work out the feasibility of a 20% stock dividend. The equity section of the balance sheet follows:
Common Stock (2 Million shares, $1 Par 2000
Capital in Excess of Par 8,000
Retained Earnings 10,000
Total Common Equity 20,000
The current market price of the company's stock is $31 per share. Is it possible to apy a 20% stock dividend? Is it possible to pay a 10% stock dividend? Explain?
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P16-12 Malea Liberty has 800,000 common stock share outstanding. It has decided to declare a 30% stock dividend. The new par value is the same as the original par value, $3. Before the declared dividend, the retained earnings account was $60,000,000 and capital in excess of par was $13,600,000. The current stock price is $40 per share. Calculate the new values for the following items:
a. Number of shares of common stock?
b. Capital in excess of par?
c. Retained earnings?
P16-13 Malea Liberty market price before the declared stock dividend was $40 per share. What would be the market price after the declared stock dividend described in the problem 16-12 (Assume the total value of the firm's stock remains the same.)View Full Posting Details