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Dividends and Stock Splits, ROE

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1) Current Stock Sale Price = $40 per share and there are 1,200,000 shares outstanding. What is the effect on # of shares outstanding and stock price if:
a) 15% Dividend
b) 4-for-3 Stock Split
c) Reverse 3-for-1 Stock Split

2) If 2 companies have the same Net Income ($1,000,000) and the same Assets ($10,000,000), Explain why one has 11.1% ROE and the other has 20% ROE, what are the possible reasons for the difference in ROE?

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1) Current Stock Sale Price = $40 per share and there are 1,200,000 shares outstanding. What is the effect on # of shares outstanding and stock price if:
a) 15% Dividend
b) 4-for-3 Stock Split
c) Reverse 3-for-1 Stock Split

Value of the company does not change because of stock dividends, stock splits and reverse stock splits

Number of sharse= 1,200,000
Stock price= $40 per share
Therefore value of the company= $48,000,000 =1,200,000 x $40.

a) 15% Dividend
15% stock dividend
No of additional shares issued= 180,000 =15% x 1,200,000.
Original number of shares= 1,200,000
Total number of shares ...

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Answers questions on Dividends, Stock Splits, ROE.

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Stock Dividend , Stock Split, Reverse Stock Split and ROE for Menomonie Publishing

1) 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

2) 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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