Tut-09-ans - FINS5514 TUTORIAL COVERING WEEK 9 – THE...

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Unformatted text preview: FINS5514 TUTORIAL COVERING WEEK 9 – THE DIVIDEND DECISION 1. Attempt the following questions from Ross, Westerfield and Jordan a. Chapter 18, Questions and Problems: 2, 4, 5, 10, 11 18:2 Hexagon International equity accounts are : Common stock ($1 par value) $ 10,000 Capital surplus 180,000 Retained earnings 586,500 Total $776,500 a. If Hexagon stock currently sells for $30 per share and a 20% stock dividend is declared, how many new shares will be dist ributed? Show how the equity accounts would change. Shares outstanding before the dividend 10,000 Value of common stock / Par value New shares issued 2,000 Shares outstanding x Dividend New shares outstanding 12,000 Sum of old and new shares Capital surplus on new shares $ 58,000 New shares x (Share price - Par value) Owner's Equity Accounts Common stock $ 12,000 Outstanding shares x Par value Capital surplus $238,000 Sum of capital surplus on old and new shares Retained earnings $526,500 Total owners equity - (capital surplus + common stock) Total owners equity $776,500 b. If Hexagon declared a 30% stock dividend, how would the accounts change? Shares outstanding before the dividend 10,000 New shares issued 3,000 New shares outstanding 13,000 Capital surplus on new shares $ 87,000 Owner's Equity Accounts Common stock $ 13,000 Capital surplus $267,000 Retained earnings $496,500 Total owners equity $776,500 18:4. Kumamoto Poultry company has 150,000 shares of stock outstanding, selling at ¥700 per share. Assuming no market imperfections or tas effects exist, what will the share price be after: a. Kumamoto has a five-for-two stock split? b. Kumamoto has a 10% stock dividend? c. Kumamoto has a 42.5% stock dividend? d. Kumamoto has a four-for-seven reverse stock split?...
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This note was uploaded on 05/26/2011 for the course FIN 5530 taught by Professor Lee during the Three '11 term at University of New South Wales.

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Tut-09-ans - FINS5514 TUTORIAL COVERING WEEK 9 – THE...

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