49) Reverse stock splits can be used to
A) adjust the debt-equity ratio such that it falls within a preferred range.
B) increase the excess cash held by a firm.
C) increase both the number of shares outstanding and the market price per share simultaneously.
D) increase the total equity of a firm.
E) avoid delisting.
50) Which statement is correct?
A) Total owner’s equity decreases with a small stock dividend but not with a large stock dividend.
B) A large stock dividend increases both the common stock and the capital in excess of par value
account values.
C) Stock dividends of 40 percent or less are called small stock dividends.
D) Stock splits and stock dividends have been definitively proven to have no effect on a firm’s
market value.
E) A small stock dividend increases both the par value per share and the value of the capital in
excess of par value account.
51) Assume the stockholders of GPO stock are in the 15 percent tax bracket. The closing price of
the stock today was $32.09 a share. The firm pays a quarterly dividend of $1.20 per share. What is
the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?
A) $32.09
B) $30.71
C) $32.14
D) $27.61
E) $31.07
52) Assume the stockholders of EX stock are in the 25 percent tax bracket. The closing price of the
stock today was $54.15 a share. The firm pays a quarterly dividend of $1.22 per share. What is the
expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?
A) $52.63
B) $55.53
C) $54.18
D) $53.61
E) $53.24
53) Lisa purchased 200 shares of ABC stock on May 15th. On May 21st, she purchased another
200 shares, and then on May 22nd, she purchased 200 additional shares. The company declared a
dividend of $1.47 a share on May 5th to holders of record on Friday, May 23rd. The dividend is
payable on May 31st. How much dividend income will she receive on May 31st from ABC?
A) $0
B) $294
C) $234
D) $468
E) $588
54) On May 18th, you purchased 900 shares of LKM stock. On June 1st, you sold 100 shares of
this stock for $32 a share. You sold an additional 200 shares on July 6th at a price of $34.50 a
share. The company declared a per share dividend of $.33 on June 20th to holders of record as of
Friday, July 8th. This dividend is payable on July 29th. How much dividend income will you
receive on July 29th as a result of your ownership of LKM stock?
A) $0
B) $198
C) $240
D) $264
E) $297
55) Leslie owns 600 shares of Good Manners stock. The company will pay per share dividends of
$1.42 1 year from now and $1.48 2 years from now. Leslie does not want any dividend income 1
year from now but does want as much dividend income as possible the following year. She plans
on creating her own homemade dividends and can borrow and lend at 7 percent. Ignoring taxes,
what will her homemade dividend per share be 2 years from now?
A) $2.97
B) $2.90
C) $2.46
D) $3.00
E) $1.48
56) Luis owns 300 shares of a stock that plans to pay a special $4.65 per share dividend 1 year from
today and a final $.32 per share dividend 2 years from today. He does not desire any dividend
income in 2 years but wants all of his dividends in 1 year. He can borrow and lend at 9 percent.
Ignoring taxes, what will be his total homemade dividend in 1 year?
A) $1,306.93
B) $1,491.00
C) $1,208.15
D) $1,616.55
E) $1,845.15
57) A firm has a market value equal to its book value, excess cash of $500, other assets of $6,200,
and equity of $8,200. The firm has 400 shares of stock outstanding and net income of $680. What
will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?
A) $1.44
B) $.94
C) $.86
D) $1.81
E) $1.53
58) New Built wants to repurchase 15,000 of its shares at $32 a share through a tender offer.
Shareholders responded by offering 18,500 shares. Assume you are a shareholder and offered your
400 shares as part of the shareholder response. How many of your shares should you expect New
Built to purchase?
A) 0 shares
B) 400 shares
C) 348 shares
D) 324 shares
E) 279 shares
59) A firm has a market value equal to its book value, excess cash of $400, other assets of $9,200,
and equity of $9,800. The firm has 500 shares of stock outstanding and net income of $420. The
firm has decided to spend all of its excess cash on a share repurchase program. How many shares
of stock will be outstanding after the stock repurchase is completed?
A) 440 shares
B) 445 shares
C) 480 shares
D) 910 shares
E) 915 shares
60) Eisley’s has a market value equal to its book value, excess cash of $528, other assets of
$13,900, and equity of $9,900. The firm has 600 shares of stock outstanding and net income of
$1,450. Assume the firm uses all of its excess cash for a stock repurchase. What will the price per
share be after the repurchase?
A) $16.50
B) $17.80
C) $18.00
D) $15.90
E) $17.67
61) KLT just paid an annual dividend of $1.62 a share. The firm has a target payout ratio of 0.55
and a speed of adjustment value of 0.4. What is the expected value of next year’s annual dividend if
the firm expects its earnings per share to be $3.98?
A) $2.50
B) $1.85
C) $1.74
D) $1.92
E) $1.71
62) The Robert’s Co. just paid an annual dividend of $1.49 a share. The firm has a target payout
ratio of 0.38 and a speed of adjustment value of 0.7. What is the expected value of next year’s
annual dividend if the firm expects its earnings per share to be $4.87?
A) $1.66
B) $1.70
C) $1.95
D) $1.98
E) $1.74
63) You currently own 300 shares of Hanover Co. The stock closed at a price of $32.09 a share
today. Tomorrow morning, a stock dividend of 8 percent will occur. What will be the change in the
value of your investment tomorrow assuming there are no other factors affecting the market price
of the stock?
A) $0
B) −$528.60
C) $399.70
D) −$770.16
E) $770.16
64) Pluto’s has 15,300 shares of stock outstanding with a par value of $1 per share and a market
value of $22.10 per share. The balance sheet shows $324,800 in the capital in excess of par
account, $15,300 in the common stock account, and $174,700 in the retained earnings account.
The firm just announced a small stock dividend of 12 percent. What will be the balance in the
retained earnings account after the dividend?
A) $129,700.00
B) $134,124.40
C) $128,309.18
D) $132,360.00
E) $128,509.90
65) Corner Mart has 130,000 shares of stock outstanding with a par value of $1 per share and a
market value of $38.40 per share. The firm just announced a small stock dividend of 15 percent.
What will be the market price per share after the dividend?
A) $32.90
B) $33.39
C) $38.40
D) $41.08
E) $44.16
66) Bruno’s has 13,000 shares of stock outstanding with a par value of $1 per share and a market
value of $38.29 per share. The balance sheet shows $13,000 in the common stock account,
$78,300 in the capital in excess of par value account, and $82,500 in retained earnings. The firm
just announced a large stock dividend of 40 percent. What will be the balance in the capital in
excess of par value account after the dividend?
A) $272,208
B) $277,408
C) $145,300
D) $78,300
E) $91,300
67) Cat’s has 41,800 shares of stock outstanding with a par value of $1 per share and a market
value of $13.57 per share. The balance sheet shows $41,800 in the common stock account,
$247,900 in the capital in excess of par value account, and $308,500 in retained earnings. The firm
just announced a large stock dividend of 50 percent. What is the value of the retained earnings
account after the dividend?
A) $287,600
B) $268,500
C) $24,887
D) $45,787
E) $308,500
68) The Uptowner has 11,000 shares of stock outstanding with a par value of $1 per share and a
market value of $14 per share. The balance sheet shows $11,000 in the common stock account,
$60,300 in the capital in excess of par value account, and $72,100 in the retained earnings account.
The firm just announced a large stock dividend of 65 percent. What is the value of the common
stock account after the dividend?
A) $17,750
B) $18,500
C) $18,150
D) $11,000
E) $14,000
69) Men’s Place has 21,000 shares of stock outstanding with a par value of $1 per share and a
market value of $27.18 per share. The balance sheet shows $21,000 in the common stock account,
$187,600 in the capital in excess of par value account, and $218,200 in the retained earnings
account. The firm just announced a large stock dividend of 35 percent. What is the market value
per share after the dividend?
A) $27.18
B) $20.13
C) $20.25
D) $19.50
E) $19.67
70) Pete’s Pets has 18,500 shares of stock outstanding with a par value of $1 per share and a market
price of $21 a share. The firm just announced a three-for-two stock split. How many shares of
stock will be outstanding after the split?
A) 12,000 shares
B) 14,000 shares
C) 27,750 shares
D) 22,250 shares
E) 29,250 shares
71) Robinson’s has 12,000 shares of stock outstanding with a par value of $1 per share and a
market price of $24.20 a share. The firm just announced a four-for-three stock split. What will the
market price per share be after the split?
A) $18.15
B) $17.65
C) $18.25
D) $30.46
E) $32.27
72) AJ’s has 12,400 shares of stock outstanding with a par value of $1 per share and a market price
of $31 a share. The balance sheet shows $12,400 in the common stock account, $67,200 in the
capital in excess of par value account, and $59,300 in the retained earnings account. The firm just
announced an upcoming five-for-four stock split. What will be the value of the common stock
account after the split?
A) $9,920
B) $12,500
C) $15,500
D) $12,400
E) $15,000
73) Jensen’s has 18,000 shares of stock outstanding with a par value of $1 per share and a market
price of $32.30 a share. The balance sheet shows $18,000 in the common stock account, $109,600
in the capital in excess of par value account, and $78,200 in the retained earnings account. The
firm just announced a stock split of five-for-three. What will be the balance in the capital in excess
of par value account after the split?
A) $138,700
B) $94,560
C) $458,200
D) $109,600
E) $458,440
74) The Retail Outlet has 17,500 shares of stock outstanding with a par value of $1 per share. The
current book value of the firm is $387,800 and the balance in the capital in excess of par value
account is $146,300. The company just announced a four-for-three stock split. What will be the
common stock account balance after the split?
A) $11,000
B) $13,125
C) $23,333
D) $14,500
E) $17,500
75) The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1 per share. The
current market value of the firm is $120,000. The company just announced a one-for-three reverse
stock split. What will the par value per share be after the split?
A) $.33
B) $.25
C) $1.00
D) $3.00
E) $4.00
76) Winslow Co. has 74,200 shares of stock outstanding at a market price of $52 a share. The
company just announced a five-for-two stock split. How many shares of stock will be outstanding
after the split?
A) 29,680 shares
B) 32,320 shares
C) 74,200 shares
D) 180,500 shares
E) 185,500 shares
77) Auto Supply has 54,200 shares of stock outstanding with a par value of $1 per share and a
market value of $6.20 a share. The company just announced a two-for-nine reverse stock split.
What will be the par value per share after the split?
A) $.22
B) $.44
C) $1.00
D) $2.50
E) $4.50
78) Edie’s has 14,500 shares of stock outstanding with a par value of $1 per share and a market
value of $5.80 a share. What type of stock split would be best if the stock’s proper trading range
centers on $16 a share?
A) Stock split of eight-for-three
B) Stock split of eleven-for-four
C) Reverse stock split of three-for-one
D) Reverse stock split of three-for-eight
E) Reverse stock split of four-for-eleven
79) A stock currently sells for $65.70 a share. What type of stock split would be best if the stock’s
proper trading range centers on $22 a share?
A) two-for-five reverse stock split
B) one-for-three reverse stock split
C) two-for-three reverse stock split
D) five-for-two stock split
E) three-for-one stock split