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52) Alpha Co. is paying a $.72 per share dividend today. There are 138,000 shares outstanding
with a par value of $1 per share. As a result of this dividend, the:
A) retained earnings will decrease by $99,360.
B) retained earnings will decrease by $138,000.
C) common stock account will decrease by $138,000.
D) common stock account will decrease by $99,360.
E) capital in excess of par value account will decrease by $99,360.
53) The Rent It Company declared a dividend of $.60 a share on October 20th to holders of
record on Monday, November 1st. The dividend is payable on December 1st. You purchased 100
shares of this stock on Wednesday, October 27th. How much dividend income will you receive
on December 1st as a result of this declaration?
A) $0
B) $1.50
C) $6.00
D) $15.00
E) $60.00
54) Schaeffer Shippers announced on May 1 that it will pay a dividend of $1.20 per share on
June 15 to all holders of record as of May 31st. The firm's stock price closed today at $42 a
share. Assume all investors are in the 22 percent tax bracket. If tomorrow is the ex-dividend date,
what would you expect the opening price to be tomorrow morning assuming all else is held
constant?
A) $42.00
B) $43.20
C) $41.06
D) $42.94
E) $41.66
55) You purchased 200 shares of ABC stock on July 15th. On July 20th, you purchased another
100 shares and then on July 22nd you purchased your final 200 shares of ABC stock. The
company declared a dividend of $1.10 a share on July 5th to holders of record on Friday, July
23rd. The dividend is payable on July 31st. How much dividend income will you receive on July
31st from ABC?
A) $0
B) $220
C) $330
D) $440
E) $550
56) On May 18th, you purchased 1,000 shares of Buy Lo stock. On June 5th, you sold 200 shares
of this stock for $21 a share. You sold an additional 400 shares on July 8th at a price of $22.50 a
share. The company declared a $.50 per share dividend on June 25th to holders of record as of
Thursday, July 10th. This dividend is payable on July 31st. How much dividend income will you
receive on July 31st as a result of your ownership of this firm's stock?
A) $100
B) $200
C) $300
D) $400
E) $500
57) You own 300 shares of Abco stock. The firm plans on issuing a dividend of $2.10 a share
one year from today and then issuing a final liquidating dividend of $36.45 a share two years
from today. Your required rate of return is 14.5 percent. Ignoring taxes, what is the value of one
share of this stock to you today?
A) $33.93
B) $29.64
C) $26.62
D) $27.80
E) $31.05
58) You own 200 shares of Loner stock. The firm announced that it will be issuing a dividend of
$.20 a share one year from today followed by a final liquidating dividend of $1.60 a share two
years from today. If you can earn 7 percent on your funds, what will be the value of your total
investment income in two years if you do not want to receive any funds until then?
A) $362.80
B) $266.67
C) $302.30
D) $348.04
E) $247.78
59) Priscilla owns 500 shares of Deltona stock. It is January 1, 2018, and the company recently
issued a statement that it will pay a $1 per share dividend on December 31, 2018, a $2.50 per
share dividend on December 31, 2019, and then cease all dividend payments. Priscilla does not
want any dividend income this year but does want as much dividend income as possible next
year. Priscilla can earn 8 percent on her investments. Ignoring taxes, what will Priscilla's
homemade dividend per share be in 2019?
A) $3.78
B) $3.50
C) $2.50
D) $3.58
E) $1.08
60) Allison's has a market value equal to its book value. Currently, the firm has excess cash of
$1,100 and other assets of $12,400. Equity is worth $13,500. The firm has 2,500 shares of stock
outstanding and net income of $10,800. What will be the new earnings per share if the firm uses
its excess cash to complete a stock repurchase?
A) $4.32
B) $4.50
C) $4.82
D) $4.70
E) $4.40
61) Assume a firm has a market value equal to its book value, excess cash of $900, other assets
of $16,500, and equity valued at $17,400. The firm has 1,200 shares of stock outstanding and net
income of $15,400. If the firm spends all of its excess cash on share repurchases, how many
shares will be outstanding after the repurchases are completed? (Round your answer up to the
nearest whole share)
A) 1,148 shares
B) 1,135 shares
C) 1,138 shares
D) 1,164 shares
E) 1,142 shares
62) Jensen's has a market value equal to its book value, excess cash of $500, other assets of
$9,500, and equity worth $10,000. The firm has 250 shares of stock outstanding and net income
of $1,400. What will be the stock price per share if the firm pays out its excess cash as a cash
dividend?
A) $36
B) $38
C) $40
D) $42
E) $44
63) DD&L has a market value equal to its book value, excess cash of $400, other assets of
$7,600, equity of $8,000, 200 shares of stock outstanding, and net income of $900. The firm has
decided to pay out all its excess cash as a cash dividend. What will be the earnings per share after
the dividend is paid?
A) $4.68
B) $4.74
C) $4.59
D) $4.80
E) $4.50
64) A firm has a market value equal to its book value, excess cash of $1,000, and equity worth
$17,800. The firm has 5,000 shares of stock outstanding and net income of $31,200. What will
be the new earnings per share if the firm uses its excess cash to complete a stock repurchase?
A) $7.20
B) $6.50
C) $6.61
D) $5.89
E) $6.23
65) Assume you own 300 shares of ABC stock and receive a stock dividend of 5 percent. As a
result, the number of shares you own will change to ________ shares while your total wealth
will increase by ________ percent.
A) 305; 5
B) 315; 0
C) 305; 0
D) 315; 5
E) 300; 5
66) Murphy's has shares of stock outstanding with a par value of $1 per share and a market value
of $24.60 per share. The balance sheet shows $32,500 in the capital in excess of par account,
$12,000 in the common stock account, and $68,700 in the retained earnings account. The firm
just announced a stock dividend of 10 percent. What will be the balance in the retained earnings
account after the dividend?
A) $39,180
B) $48,300
C) $59,120
D) $67,520
E) $40,380
67) Brown's Market has 15,000 shares of stock outstanding with a par value of $1 per share and a
market value per share of $8. The firm just announced a stock dividend of 10 percent. What will
be the market price per share after the dividend?
A) $7.20
B) $7.27
C) $7.33
D) $8.00
E) $8.80
68) Samuel's has 42,000 shares of stock outstanding with a par value of $1 per share and a
market price per share of $41. The balance sheet shows $1,358,000 in the capital in excess of par
account and $2,212,500 in the retained earnings account. The firm just announced a stock
dividend of 50 percent. What is the value of the capital in excess of par account after the
dividend?
A) $1,358,000
B) $612,500
C) $518,000
D) $497,000
E) $221,900
69) Davidsons has 15,000 shares of stock outstanding with a par value of $1 per share and a
market value of $45 per share. The balance sheet shows $15,000 in the common stock account,
$158,000 in the capital in excess of par account, and $132,500 in the retained earnings account.
The firm just announced a stock dividend of 50 percent. What is the value of the retained
earnings account after the dividend?
A) $125,000
B) $117,500
C) $132,500
D) $140,000
E) $147,500
70) The Saw Mill has shares of stock outstanding with a par value of $1 per share and a market-
to-book ratio of 2.1. The balance sheet shows $5,000 in the common stock account, $58,000 in
the capital in excess of par account, and $32,500 in the retained earnings account. The firm just
announced a stock dividend of 50 percent. What is the book value of the common stock account
after the dividend?
A) $10,000
B) $8,500
C) $9,000
D) $7,500
E) $5,000
71) Downtown Deli has 2,000 shares of stock outstanding with a par value of $1 per share and a
market value of $26 per share. The balance sheet shows $2,000 in the common stock account,
$9,500 in the capital in excess of par account, and $14,500 in the retained earnings account. The
firm just announced a stock dividend of 75 percent. What is the market value per share after the
dividend?
A) $36.00
B) $14.86
C) $45.50
D) $13.50
E) $12.00
72) Robinson's has 15,000 shares of stock outstanding with a par value of $1 per share and a
market price of $36 a share. How many shares of stock will be outstanding of the firm does a 3-
for-2 stock split?
A) 10,000 shares
B) 12,500 shares
C) 20,000 shares
D) 22,500 shares
E) 27,500 shares
73) Robinson's has 15,000 shares of stock outstanding with a market price of $6 a share. What
will be the market price per share if the firm does a 1-for-3 reverse stock split?
A) $18
B) $24
C) $42
D) $48
E) $54
74) Kelso's balance sheet shows $15,000 in the common stock account, $315,000 in the capital
in excess of par account, and $189,000 in the retained earnings account. The firm just announced
a 3-for-2 stock split. What will be the value of the common stock account after the split if the par
value per share is $1?
A) $10,000
B) $12,500
C) $15,000
D) $18,500
E) $22,500
75) Assume Downtown Markets latest balance sheet shows $15,000 in the common stock
account, $315,000 in the capital in excess of par account, and $189,000 in the retained earnings
account. What will be the capital in excess of par account value if the firm does a 5-for-3 stock
split?
A) $126,000
B) $210,000
C) $283,500
D) $315,000
E) $472,500
76) The Retail Outlet has 6,000 shares of stock outstanding and the current market value of the
firm is $429,000. The company just announced a 2-for-1 stock split. What will be the market
price per share after the split?
A) $35.75
B) $40.50
C) $80.50
D) $71.50
E) $50.25
77) The Retail Outlet has 8,000 shares of stock outstanding with a par value of $1 per share. The
current market value of the firm is $620,000. The balance sheet shows a capital in excess of par
account value of $66,000 and retained earnings of $234,000. The company just announced a 3-
for-1 stock split. What will be the retained earnings account balance after the split?
A) $117,000
B) $234,000
C) $351,000
D) $410,000
E) $468,000
78) The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share.
The company has just announced a 5-for-2 stock split. How many shares of stock will be
outstanding after the split?
A) 50,000
B) 75,000
C) 156,250
D) 175,000
E) 312,500
79) Deep Water Drilling has 160,000 shares of stock outstanding at a market price of $109 a
share. The company has just announced a 7-for-3 stock split. What will be the market price per
share after the split?
A) $38.27
B) $46.71
C) $48.40
D) $46.18
E) $48.80
80) A firm has a total market value of $89,600 with 6,500 shares of stock outstanding. What will
be the total market value of the firm if it does a 1-for-2 reverse stock split?
A) $179,200
B) $148,300
C) $122,300
D) $89,600
E) $44,800
81) Bob's Auto Group has 25,000 shares of stock outstanding at a market price of $4.50 a share.
What will be the market price per share if the company does a 1-for-5 reverse stock split?
A) $.90
B) $1.20
C) $22.50
D) $27.00
E) $29.50
82) Edie's Health Supply has 125,000 shares of stock outstanding with a par value of $1 per
share and a market value of $5 a share. The company has retained earnings of $76,500 and
capital in excess of par of $340,000. The company just announced a 1-for-5 reverse stock split.
What will be the par value per share after the split?
A) $.20
B) $.25
C) $2.50
D) $5.00
E) $10.00
83) The Cameron Co. is paying a dividend of $.82 a share today. There are 120,000 shares
outstanding with a par value of $1 per share. As a result of this dividend, the:
A) retained earnings will decrease by $120,000.
B) retained earnings will decrease by $98,400.
C) common stock account will decrease by $98,400.
D) common stock account will increase by $120,000.
E) capital in excess of par value account will decrease by $21,600.
84) Explain why an ex-dividend date is a required step in the dividend payout process.
85) It has been shown that in the absence of taxes and other market imperfections firm value will
be unaffected by dividend policy. Explain the logic behind this conclusion.
86) Explain the general characteristics of a tender offer.
87) Explain what a targeted repurchase is and why a firm might do a repurchase of this type.
88) Explain why executives who hold stock options prefer stock repurchases over stock
dividends.
