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25)Health Systems Inc. is considering a 10 percent stock dividend. The capital accounts are as follows: Common stock (6,000,000 shares at $10 par)$ 60,000,000 Capital in excess of par*35,000,000 Retained earnings75,000,000 Net worth$170,000,000 *The increase in capital in excess of par as a result of a stock dividend is equal to the shares created times (Market price – Par value). The company’s stock is selling for $28 per share. The company had total earnings of $12,000,000 with 6,000,000 shares outstanding and earnings per share were $2.00. The firm has a P/E ratio of 14. a.What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. (Do not round intermediate calculations. Input your answers in dollars, not millions (e.g. $1,230,000).) Common stock$ Capital in excess of par Retained earnings Net worth $ b.What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.) (Do not round intermediate calculations and round your answers to 2 decimal places.) EPS$ Stock price$ c.How many shares would an investor have if he or she originally had 90? (Do not round intermediate calculations and round your answer to the nearest whole share.) Number of shares d.What is the investor’s total investment worth before and after the stock dividend if the P/E ratio remains constant? (Do not round intermediate calculations and round your answers to the nearest whole dollar.) Total Investment Before stock dividend$ After stock dividend$ e.Assume Mr. Heart, the president of Health Systems, wishes to benefit stockholders by keeping the cash dividend at a previous level of $1.05 in spite of the fact that the stockholders how have 10 percent more shares. Because the cash dividend is not reduced, the stock price is assumed to remain at $28. What is an investor’s total investment worth after the stock dividend if he/she had 90 shares before the stock dividend? Total investment$ f.Under the scenario described in part e, is the investor better off? YesNo g.As a final question, what is the dividend yield on this stock under the scenario described in part e?(Input your answer as a percent rounded to 2 decimal places.) Dividend yield%
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24)Worst Buy Company has had a lot of complaints from customers of late, and its stock price is now only $2 per share. It is going to employ a one-for-six reverse stock split to increase the stock value. Assume Dean Smith owns 72 shares. a.How many shares will he own after the reverse stock split? (Do not round intermediate calculations and round your answer to the nearest whole number.) Number of shares b.What is the anticipated price of the stock after the reverse stock split? (Do not round intermediate calculations and round your answer to 2 decimal places.) Anticipated stock price$ c.Because investors often have a negative reaction to a revere stock split, assume the stock only goes up to 80 percent of the value computed in part b. What will the stock’s price be? (Do not round intermediate calculations and round your answer to 2 decimal places.) Stock price$ d.How has the total value of Dean Smith’s holdings changed from before the reverse stock split to after the reverse stock split (based on the stock value computed in part c)? To get the total value before and after the split, multiply the shares held times the stock price.(Input the amount as a positive value. Do not round intermediate calculations and round your answer to 2 decimal places.) Dean Smith’s holdings (Click to select)Increased bydecreased by $Sign up to view the entire interaction
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23)The Hastings Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the stockholders could earn if the funds were paid out in the form of dividends. YearNet IncomeProfitable Capital
Expenditure1 $19 million $ 7 million 2 19 million 12 million 3 9 million 6 million 4 14 million 7 million 5 17 million 8 million The Hastings Corporation has 3 million shares outstanding (The following questions are separate from each other). a.If the marginal principle of retained earnings is applied, how much in total cash dividends will be paid over the five years? (Enter your answer in millions.) Total cash dividends$ million b.If the firm simply uses a payout ratio of 20 percent of net income, how much in total cash dividends will be paid? (Enter your answer in millions and round your answer to 1 decimal place.) Total cash dividends$ million c.If the firm pays a 20 percent stock dividend in years 2 through 5, and also pays a cash dividend of $2.40 per share for each of the five years, how much in total dividends will be paid? Total cash dividends$ d.Assume the payout ratio in each year is to be 40 percent of net income and the firm will pay a 30 percent stock dividend in years 2 through 5. How much will dividends per share for each year be? (Assume cash dividend is paid after the stock dividend). (Round your answers to 2 decimal places.) YearDividends
per Share1$ 2$ 3$ 4$ 5
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22)The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $4 per share. Common stock (60,000 shares at $1 par)$60,000 Capital in excess of par 60,000 Retained earnings 180,000 Total equity$300,000 The firm intends to first declare a 5 percent stock dividend and then pay a 20-cent cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) Western Pipe Co. After Stock Dividend Common stock$ Capital in excess of par Retained earnings Total equity$ Western Pipe Co.After Cash Dividend Common stock $ Capital in excess of par Retained earnings Total equity$
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