Bergman chapter12 - Chris Bergman Principles of Finance...

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Chris Bergman Principles of Finance 25049 December 1, 2008 [email protected] Declaration Ex Dividend Date of Payment Date Date Record Date I I I I I I I I Thursday Monday Monday July 6 July 10 July 31 I---------------------------------I-------------------------I------------------I Board of directors declares I I I $1.10 per share dividend payable to holders of record I__________ _ I I on Monday July 1, payable I on Monday, July 31 Stock begins to sell ex Checks of $1.10 per share dividend on Thursday are mailed on Monday July 31 July 6, which is 2 business to all holders of record on days before the Monday Monday, July 10. July 10, date of record TIME ----------------------> When the dividend was announced by the directors, $330,000 of the retained earnings ($1.10 per share x 300,000 shares) was transferred to the dividends payable account. The key account thus became Cash $500,000 Dividends Payable $330,000 Retained Earnings $2,170,000 b. The ex dividend date is Thursday, July 6. c. Cash $170,000 Dividends Payable $ 0 Retained Earnings $2,170,000 d. The net effect of declaring and paying the dividend was to reduce the firm's total assets (and stockholders' equity) by $330,000 e. The stock price would drop by approximately $1.10 per share when it began selling ex dividend on July 6. 4) a. Maximum dividend per share= ($1,900,000/400,000)= $4.75
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Bergman chapter12 - Chris Bergman Principles of Finance...

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