48) A stock split:
A) increases the total value of the common stock account.
B) decreases the value of the retained earnings account.
C) increases the par value per share.
D) increases the value of the capital in excess of par account.
E) decreases the market value per share.
49) Stock splits can be used to:
A) adjust the market price of a stock so it falls within a preferred trading range.
B) decrease a company’s excess cash thereby lowering agency costs.
C) increase the par value per share while decreasing the market price per share.
D) increase the total equity of a firm.
E) adjust the debt-equity ratio to its preferred level.
50) Which one of the following is a direct result of a two-for-one stock split?
A) A 100 percent increase in the number of shareholders
B) A 100 percent increase in the common stock account balance
C) A 100 percent decrease in the stock price
D) A 50 percent increase in the number of shares outstanding
E) A 50 percent decrease in the par value per share
51) Alta Gems stock is currently trading at $36 a share. The company believes its primary
clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares.
This company should consider a:
A) reverse stock split.
B) liquidating dividend.
C) stock dividend.
D) stock split.
E) special dividend.
52) A one-for-four reverse stock split will increase:
A) the par value by 25 percent.
B) the number of shares outstanding by 400 percent.
C) the market value but not affect the par value per share.
D) a $1 par value to $4.
E) a $1 par value to $5.
53) A company wants to maintain a stock price around $16 a share. Due to a recent market
downturn, the stock is currently selling for $6 a share. The company should consider a ________
stock split.
A) 3-for-1
B) 4-for-1
C) 1-for-3 reverse
D) 1-for-4 reverse
E) 1-for-5 reverse
54) Plyler Cabinets declared a dividend of $1.32 per share on May 30 to holders of record on
Monday, June 12. The dividend is payable on June 16. Sara purchased 300 shares of this stock
on Thursday, June 8. How much dividend income will she receive on June 12 from these shares?
A) $0
B) $396
C) $167
D) $198
E) $132
55) The market value balance sheet for Apple Pie Corp. reflects cash of $42,000, fixed assets of
$319,000, and equity of $237,000. There are 7,500 shares of stock outstanding with a par value
of $1 per share. The company has declared a dividend of $1.03 per share. The stock goes ex
dividend tomorrow. Ignore any tax effects. What will be the price of the stock tomorrow
morning?
A) $32.38
B) $32.20
C) $30.57
D) $32.15
E) $31.60
56) The Green Fiddle has declared a dividend of $2.60 per share. Suppose capital gains are not
taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld
at the time the dividend is paid. Green Fiddle stock closed at $36.80 per share today and the
stock goes ex dividend tomorrow. What will be the ex-dividend price?
A) $34.59
B) $39.40
C) $36.80
D) $34.20
E) $34.70
57) Aaron purchased 500 shares of KMP stock on May 8. On May 16, he purchased another 200
shares and then on May 20 he purchased a final 100 shares of KMP stock. The company declared
a dividend of $.94 a share on May 6 to holders of record on Friday, May 22. The dividend is
payable on June 12. How much dividend income will Steve receive on June 12?
A) $752
B) $640
C) $658
D) $728
E) $680
58) On July 9, you purchased 800 shares of Blue Water stock for $32 a share. On August 4, you
sold 200 shares of this stock for $33 a share. You sold an additional 200 shares on August 14 at a
price of $34.50 a share. The company declared a dividend of $.76 per share on August 3 to
holders of record as of Monday, August 17. This dividend is payable on September 15. How
much dividend income will you receive on September 15?
A) $304
B) $418
C) $456
D) $360
E) $608
59) You own 900 shares of Dell Hardware. The company plans on issuing a dividend of $1.98 a
share one year from now and then issuing a final liquidating dividend of $11.32 a share after one
additional year. Your required rate of return on this security is 16.5 percent. Ignoring taxes, what
is the value of one share of this stock to you today?
A) $10.30
B) $9.43
C) $10.04
D) $9.92
E) $10.32
60) You own 600 shares of stock in Avondale Corporation. The company plans to pay a dividend
of $2.48 per share in one year and a final liquidating dividend of $20.10 per share two years from
now. The required return on Avondale stock is 16.3 percent. What will your dividend income be
this year if you use homemade dividends to create two equal annual dividend payments?
A) $6,270
B) $6,712
C) $5,667
D) $6,376
E) $6,400
61) You own 400 shares of stock in A-Z Tours. The company plans to pay a dividend of $.65 in
Year 1 and a final liquidating dividend of $28.50 per share in Year 2. The required return is 15.6
percent. If you only want $200 total in dividends in the first year, what will be your homemade
dividend in the second year?
A) $12,696
B) $10,764
C) $11,469
D) $11,402
E) $12,878
62) Al owns 250 shares of M&M Enterprises and earns 12.9 percent on his investment. M&M
recently stated that it will pay dividends per share of $.69 this year and $.72 next year. Al does
not want any dividend income this year but does want as much dividend income as possible next
year. Ignoring taxes, what will Al’s total homemade dividend be next year?
A) $352.50
B) $366.38
C) $330.50
D) $341.80
E) $374.75
63) Water Mills has a market value equal to its book value. Currently, the company has excess
cash of $1,368, other assets of $35,807, and equity valued at $23,750. There are 2,500 shares of
stock outstanding and net income is $470. What will the new earnings per share be if the firm
uses 25 percent of its excess cash to complete a stock repurchase?
A) $.19
B) $.33
C) $.26
D) $.08
E) $.13
64) Webster United is paying a dividend of $1.09 per share today. There are 225,000 shares
outstanding with a market price of $31.17 per share prior to the dividend payment. Ignore taxes.
Before the dividend, the company had earnings per share of $2.11. As a result of this dividend,
the:
A) retained earnings will decrease by $225,000.
B) retained earnings will increase by $245,250.
C) total value of the company will not change.
D) earnings per share will increase to $3.20.
E) price-earnings ratio will be 14.26.
65) TJ’s has a market value equal to its book value. Currently, the firm has excess cash of
$218,500, other assets of $897,309, and equity of $547,200. The firm has 40,000 shares of stock
outstanding and net income of $59,800. Management has decided to spend 15 percent of the
excess cash on a share repurchase program. How many shares of stock will be outstanding after
the stock repurchase is completed?
A) 47,937
B) 48,050
C) 37,604
D) 35,578
E) 41,584
66) The market value balance sheet for Cherry Pie Corp. reflects cash of $31,020, fixed assets of
$539,750, and equity of $286,800. There are 6,000 shares of stock outstanding with a par value
of $1 per share. The company has announced that it is going to repurchase $20,000 of stock.
What will the price of the stock be after this repurchase?
A) $47.80
B) $46.60
C) $46.20
D) $47.60
E) $46.80
67) Tucker’s National Distributing has a current market value of equity of $32,400. Currently,
the firm has excess cash of $2,100, total assets of $22,400, net income of $3,210, and 800 shares
of stock outstanding. The company is going to use all of its excess cash to repurchase shares of
stock. What will the stock price per share be after the stock repurchase is completed?
A) $40.87
B) $39.94
C) $40.06
D) $40.50
E) $39.42
68) The equity of Blooming Roses has a total market value of $148,900. Currently, the firm has
excess cash of $4,200 and net income of $21,400. There are 1,100 shares of stock outstanding.
What will be the percentage change in the stock price per share if the company pays out all of its
excess cash as a cash dividend?
A) −3.14 percent
B) −2.82 percent
C) −2.75 percent
D) −3.08 percent
E) 0 percent
69) Delaware Trust has 2,400 shares of common stock outstanding at a market price per share of
$63. Currently, the firm has excess cash of $3,500, total assets of $728,900, and net income of
$41,320. The firm has decided to pay out all of its excess cash as a cash dividend. What will the
earnings per share be after this dividend is paid?
A) $9.69
B) $12.86
C) $17.22
D) $13.07
E) $19.24
70) Built Rite Corp. is evaluating an extra dividend versus a share repurchase. In either case,
$7,500 would be spent. Current earnings are $1.24 per share, and the stock currently sells for $32
per share. There are 5,000 shares outstanding. Ignore taxes and other imperfections. You own
one share of stock in this company. If the company issues the dividend, your total investment
will be worth ________ as compared to ________ if the company opts for a share repurchase.
A) $30.50; $30.50
B) $27.50; $32.00
C) $27.50; $30.50
D) $27.50; $27.50
E) $32.00; $32.00
71) Josh’s Inc. has 4,800 shares of stock outstanding with a par value of $1 per share and a
market value of $19 a share. The balance sheet shows $149,000 in the capital in excess of par
account, $4,800 in the common stock account, and $192,800 in the retained earnings account.
The firm just announced a stock dividend of 10 percent. What is the value of the capital in excess
of par account after the dividend?
A) $161,300
B) $149,000
C) $152,280
D) $157,640
E) $164,400
72) Randall’s has 34,000 shares of stock outstanding with a par value of $1 per share. The market
value is $23 per share. The balance sheet shows $152,000 in the capital in excess of par account,
$34,000 in the common stock account, and $67,500 in the retained earnings account. The firm
just announced a 5 percent (small) stock dividend. What will be the balance in the retained
earnings account after the dividend?
A) $28,400
B) $29,500
C) $30,500
D) $27,800
E) $32,500