Chapter 10 Problem Set on pages
238–239.
3.
Jersey Mining earns $9.50
a share, sells for $90, and pays a $6 per share dividend. The stock is spit two
for one and a $3 per share cash dividend is declared.
a)
What will be the new price
of the stock
b)
If the firm’s total
earnings do not change, what is the payout ratio before and after the stock
split?
4.
Firm A had the following
selected items on its balance sheet:
·
Cash $ 28,000,000
·
Common stock ($50 par;
2,000,000 shares outstanding) $100,000,000
·
Additional paid-in capital
$10,000,000
·
Retained earnings $
62,000,000
How would each of these accounts
appear after:
a)
A cash dividend of $1 per
share?
b)
A 5 percent stock dividend
(fair market value is $100 per share)?
c)
A one-for-two reverse
split?
5.
Jackson Enterprises has
the following capital (equity) accounts:
·
Common stock ($1 par;
100,000 shares outstanding) $100,000
·
Additional paid-in capital
200,000
·
Retained earnings 225,000
The board of directors has declared a
20 percent stock dividend on January 1 and a $0.25 cash dividend on March 1.
What changes occur in the capital accounts after each transaction if the price
of the stock is $4?
7.
What effect will a
two-for-one stock split have on the following items found on a firm’s financial
statements?
a)
earnings per share
$4.20
b)
total equity $10,000,000
c)
long-term debt $4,300,000
d)
additional paid-in capital
$1,534,000
e)
number of shares
outstanding 1,000,000
f)
earnings $4,200,000
4.
You are considering
purchasing the preferred stock of a firm but are concerned about its capacity
to pay the dividend. To help allay that fear, you compute the
times-preferred-dividend-earned ratio for the past three years from the
following data taken from the firm’s financial statements:
Year
X1 X2 X3
Operating
income $12,000,000 $15,000,000 $17,000,000
Interest
3,000,000 5,900,000 11,000,000
Taxes 4,000,000 5,
400,000 4,000,000
Preferred
dividends 1,000,000 1,000,000 1,500,000
Common
dividends 3,000,000
2,000,000 __
