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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 ...

#### Solution Summary

Answers questions on Dividends, Stock Splits, ROE.

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