Problem 14-1 Dividends and Stock Prices [LO 2]
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Your portfolio is 200 shares of Sunny Morning, Inc. The stock currently sells for $90 per share. The company has
announced a dividend of $2.10 per share with an ex-dividend date of April 19.
Required:
Assuming no taxes, how much will your stock be worth on April 19? (Do not include the dollar sign ($).)
Stock value
$
Problem 14-3 Dividends and Taxes [LO 2]
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Palmer, Inc., has declared a $6.70 per share dividend. Suppose capital gains are not taxed, but dividends are taxed
at 30 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Palmer sells for
$118 per share, and the stock is about to go ex-dividend.
Required:
What do you think the ex-dividend price will be? (Do not include the dollar sign ($). Round your answer to 2
decimal places (e.g., 32.16).)
Ex-dividend price
$
Problem 14-4 Stock Dividends [LO 3]
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The owners’ equity accounts for Trans World International are shown here:
Common
stock ($1
par value)
Capital
surplus
Retained
earnings
Total
owners’
equity
$
100,000
206,000
680,000
$
986,000
Requirement 1:
Assume Trans World stock currently sells for $32 per share and a 15 percent stock dividend is declared.
(a) How many new shares will be distributed?
New shares issued
(b) Show the new balance for the equity accounts. (Do not include the dollar signs ($).)
Common
stock
Capital
surplus
Retained
earnings
Total
owners’
equity
$
$
Requirement 2:
Now assume that instead Trans World declares a 20 percent stock dividend.
(a) How many new shares will be distributed?
New shares issued
(b) Show the new balance for the equity accounts. (Do not include the dollar signs ($).)
Common
stock
Capital
surplus
Retained
earnings
$
Total
owners’
equity
$
Problem 14-6 Stock Splits and Stock Dividends [LO 3]
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Bermuda Triangle Corporation (BTC) currently has 370,000 shares of stock outstanding that sell for $100 per share.
Assuming no market imperfections or tax effects exist.
Required:
Determine the share price and new number of shares outstanding if (Do not include the dollar signs ($). Round
your price per share answers to 2 decimal places (e.g., 32.16) and other answers to the nearest whole number
(e.g., 32).):
(a) BTC has a five-for-three stock split.
Price per share
$
Shares outstanding
(b) BTC has a 12 percent stock dividend.
Price per share
Shares outstanding
$
(c) BTC has a 38.0 percent stock dividend.
Price per share
$
Shares outstanding
(d) BTC has a four-for-seven reverse stock split.
Price per share
$
Shares outstanding
Requirement 1:
What effect will this transaction have on the equity of the firm? (Do not include the dollar sign ($). Input the
amount as positive value.)
Will
(Click to select)
shareholders’ equity by $
Requirement 2:
How many shares will be outstanding after the repurchase? (Round your answer to the nearest whole number
(e.g., 32).)
New shares outstanding
Requirement 3:
What will the price per share be after the repurchase? (Do not include the dollar sign ($). Round your answer to
2 decimal places (e.g., 32.16).)
Share price
$
Requirement 4:
Is the share repurchase effectively the same as a cash dividend?
(Click to select)