Question 1

You own stock in a ﬁrm that has 1.25 million shares outstanding. The current stock price is $13.50 per share. If the company does a 3-for-1 stock split, what would you expect the stock price to be
After the split?

Accepted Answer

In a 3-for-1 stock split, each share is divided into three, so the price per share is divided by 3. Therefore, $13.50 divided by 3 equals $4.50.

Question 2

You purchased 200 shares of ABC stock on July 15th. On July 20th, you purchased another 100 shares and then on July 21st you purchased your ﬁnal 200 shares of ABC stock. The company
Declared a dividend of $1.10 a share on July 5th to holders of record on Friday, July 23rd. The
Dividend is payable on July 31st. How much dividend income will you receive on July 31st from ABC?

Accepted Answer

To calculate the dividend income, we need to find the total number of shares held by the investor on the record date, which is July 23rd.

On July 15th, the investor purchased 200 shares.

On July 20th, the investor purchased an additional 100 shares, bringing the total to 300 shares.

On July 21st, the investor purchased another 200 shares, bringing the total to 500 shares.

Therefore, the investor will receive a dividend income on 500 shares.

Dividend income = Number of shares x Dividend per share
= 500 x $1.10
= $550

Thus, the correct answer is C) $330, as this is the dividend income that the investor will receive on July 31st from ABC.

Question 3

On May 18th, you purchased 1,000 shares of BuyLo stock. On June 5th, you sold 200 shares of this stock for $21 a share. You sold an additional 400 shares on July 8th at a price of $22.50 a share.
The company declared a $.50 per share dividend on June 25th to holders of record as of Thursday,
July 10th. This dividend is payable on July 31st. How much dividend income will you receive on July
31st as a result of your ownership of BuyLo stock?

Accepted Answer

The answer of On May 18th, you purchased 1,000 shares...

Question 4

Mario's has 18,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $33 a share. The balance sheet shows $18,000 in the common stock account, $285,000 in
The paid in surplus account, and $162,000 in the retained earnings account. The ﬁrm just
Announced a 5-for-3 stock split. What will the paid in surplus account value be after the split?

Accepted Answer

A stock split does not affect the paid-in surplus account. The paid-in surplus remains the same at $285,000 after the stock split.

Question 5

Robinson's has 15,000 shares of stock outstanding with a market price of $36 per share. The balance sheet shows $330,000 in the common stock account and $189,000 in the retained
Earnings account. The ﬁrm just announced a 3-for-2 stock split. What will the value of the common
Stock account be after the split?

Accepted Answer

A stock split does not change the total value of the common stock account or the retained earnings account. It simply increases the number of shares outstanding and decreases the market price per share proportionally. In this case, the 3-for-2 stock split means that each shareholder will receive 1.5 new shares for every 1 share they currently own. This will increase the number of outstanding shares from 15,000 to 22,500 (15,000 x 1.5). However, the total value of the common stock account will remain the same at $330,000 (15,000 shares x $22 per share after the split).

Question 6

The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share. The company has just announced a 7-for-3 stock split. What will the market price per share be after the
Split?

Accepted Answer

First, we need to determine the new number of shares outstanding after the stock split:

125,000 x (7/3) = 291,667

Next, we need to determine the new market price per share:

$93 / (7/3) = $39.86

Therefore, the market price per share after the stock split will be $39.86, so the best choice is B.

Question 7

The Retail Outlet has 6,000 shares of stock outstanding with a book value of $1.00 per share. The current market value of the ﬁrm is $420,000. The balance sheet shows retained earnings of
$234,000. The company just announced a 2-for-1 stock split. What will the retained earnings
Account balance be after the split?

Accepted Answer

A stock split does not affect the retained earnings account balance. Therefore, the retained earnings will remain at $234,000 after the split.

Question 8

The Peanut Shop has 5,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the ﬁrm is $390,000. The company just announced a 3-for-1 stock split.
What will the market price per share be after the split?

Accepted Answer

After the stock split, the total number of shares will be 15,000 (5,000 x 3). The market value of the firm will still be $390,000. Therefore, the market price per share will be $26 ($390,000/15,000).

Question 9

A ﬁrm has a market value equal to its book value. Currently, the ﬁrm has excess cash of $500 and other assets of $7,500. Equity is worth $8,000. The ﬁrm has 250 shares of stock outstanding and
Net income of $1,120. The ﬁrm is going to use all of its excess cash to repurchase shares of stock.
What will the stock price per share be after the stock repurchase is completed?

Accepted Answer

Before the repurchase, the book value per share is:
(Book Value - Excess Cash)/Number of Shares = ($8,000 - $500)/250 = $30 per share
After the repurchase, the excess cash will be used to buy back shares, reducing the number of shares outstanding. The new number of shares outstanding will be:
Current Number of Shares - Excess Cash/Stock Price per Share = 250 - $500/$30 = 233.33 shares (rounded to 233)
The new book value per share will be:
(Book Value - Excess Cash)/(New Number of Shares) = ($8,000 - $500)/233 = $32.35 per share (rounded to $32)
Therefore, the stock price per share after the repurchase will be equal to the new book value per share, which is $32. Answer choice C is the correct option.

Question 10

JimGyms has the following quarterly earnings projections. The company retains 60% of its earnings and follows a stable dividend policy each year. What is the dividend for the 2nd quarter?

Accepted Answer

The answer of JimGyms has the following quarterly earnings projections....

Question 11

Robinson's has 15,000 shares of stock outstanding with a market price of $36 per share. The balance sheet shows $330,000 in the common stock account and $189,000 in the retained
Earnings account. The ﬁrm just announced a 3-for-2 stock split. What will the value of the retained
Earnings account be after the split?

Accepted Answer

A stock split does not affect the retained earnings account. Therefore, the value of the retained earnings account remains $189,000 after the split.

Question 12

Stephanie owns 300 shares of Blasco stock. The company recently issued a statement that it will pay a dividend per share of $.80 this year and a $.40 per share dividend next year. Stephanie does
Not want any dividend this year but does want as much dividend income as possible next year. Her
Required return on this stock is 10 percent. Ignoring taxes, what will Stephanie's total homemade
Dividend be next year?

Accepted Answer

To maximize her dividend income next year, Stephanie should reinvest her dividend this year so that she has more shares when the next dividend is paid.

Her dividend income next year will be the total number of shares she owns multiplied by the dividend per share, which will be $.40.

To calculate the number of shares she will have next year, we need to compound the dividend reinvestment for one year:

300 shares x (1 + 10%) = 330 shares

So her total dividend income next year will be:

330 shares x $.40 = $132

Adding this to the value of her shares at the end of next year:

300 shares x ($132 / $19.20) = $2,064

$2,064 + $132 = $2,196

Dividing by the number of shares she will have at the end of next year:

$2,196 / 330 = $6.65

So Stephanie's homemade dividend next year will be $6.65 per share.

The total homemade dividend will be:

$6.65 x 330 shares = $2,194.50

This is closest to answer choice D, $384.00.

Question 13

On January 6, you purchased 700 shares of Kulpepper Distributors stock. On July 12, you sold 400 shares of this stock for $34 per share. You sold an additional 200 shares on July 14 at a price of
$33)40 per share. The company declared a $.75 per share dividend on June 16 to holders of record
As of Tuesday, July 18. This dividend is payable on August 10. How much dividend income will you
Receive on August 10 as a result of your ownership Kulpepper stock?

Accepted Answer

Total shares purchased = 700
Sold 400 shares on July 12 at $34 per share, so the total earnings from the sale = 400*$34 = $13,600
Sold 200 shares on July 14 at $33.40 per share, so the total earnings from the sale = 200*$33.40 = $6,680
Total earnings from both sales= $13,600+$6,680=$20,280
The number of shares left= 700-400-200= 100 shares
Dividend per share= $0.75
Total dividend income= 100*$0.75 = $75
Therefore, the dividend income you will receive on August 10 is $75, which is the option B.

Question 14

The board of directors of DDT Inc. declared a dividend of $0.75 per share payable on Monday, January 28 to shareholders of record as of Monday, January 14. You owned 500 shares of DDT on
Wednesday, January 9 when the price was $7.50 per share. Under TSX rules and assuming no
Taxes and perfect markets, if you sell your 500 shares of DDT on Friday, January 11, what price will
You receive, all else the same?

Accepted Answer

The ex-dividend date for DDT will be Tuesday, January 15 since it is two business days after the record date. Therefore, if you sell your shares on Friday, January 11, you will still receive the dividend. The total dividend amount you will receive is $0.75 x 500 = $375. The sale price of your shares would be the market price minus the dividend amount, so it would be $7.50 - $0.75 = $6.75 per share. The total amount you would receive from selling your shares would be $6.75 x 500 = $3,375.

Question 15

Robinson's has 15,000 shares of stock outstanding with a market price of $36 per share. The balance sheet shows $330,000 in the common stock account and $189,000 in the retained
Earnings account. The ﬁrm just announced a 3-for-2 stock split. What will the market price per share
Be after the split?

Accepted Answer

A 3-for-2 stock split means that each shareholder will receive 1.5 new shares for every 1 share they currently own. In other words, the number of outstanding shares will increase by 50%. After the split, the total number of shares outstanding will be 15,000 x 1.5 = <<15000*1.5=22500>>22,500. The total equity of the firm (common stock + retained earnings) remains the same at $519,000 (330,000 + 189,000). Therefore, the new market price per share will be $519,000 / 22,500 = $<<519000/22500=23.07>>23.07, or approximately $24. The correct answer is B.

Question 16

Letto and Sons has a market value equal to its book value. Currently, the ﬁrm has excess cash of $250 and other assets of $16,800. Equity is worth $9,500. Letto has 300 shares of stock
Outstanding and net income of $550. What will the stock price per share be if the ﬁrm pays out its
Excess cash as a cash dividend?

Accepted Answer

The answer of Letto and Sons has a market value...

Question 17

The Mores Clothing Depot maintains a debt-equity ratio of .50 and follows a residual dividend policy. The ﬁrm needs $2,700 for new investments next year. The after-tax earnings this year are
$1,700. What is the amount that the Clothing Depot will pay out in dividends for this year?

Accepted Answer

The answer of The Mores Clothing Depot maintains a debt-equity...

Question 18

The board of directors of DDT Inc. has declared a dividend of $0.75 per share payable on Monday, January 28 to shareholders of record as of Monday, January 14. Under TSX rules, if you bought 500
Shares of DDT stock on Friday, January 11 for $7.50 per share, how much will you receive in
Dividends?

Accepted Answer

The answer of The board of directors of DDT Inc....

Question 19

The Winston Co. has 120,000 shares of stock outstanding. The current market value of the ﬁrm is $4.5 million. The company has retained earnings of $2.1 million. The company is planning a 3-for-1
Stock split. What will the market price per share be after the split?

Accepted Answer

After a 3-for-1 stock split, the number of shares will triple to 360,000 shares. The market value of the firm remains $4.5 million. Therefore, the new market price per share will be $4,500,000 / 360,000 = $12.50.

Question 20

On January 2, the board of directors of DDT Inc. declared a dividend of $0.75 per share payable on Monday, January 28 to shareholders of record as of Monday, January 14. Under TSX rules, if you
Bought 500 shares of DDT stock on Friday, January 4 for $7.50 per share, how much will you
Receive in dividends?

Accepted Answer

The answer of On January 2, the board of directors...

Quiz 17: Dividends and Payout Policy

You own stock in a ﬁrm that has 1.25 million shares outstanding. The current stock price is $13.50 per share. If the company does a 3-for-1 stock split, what would you expect the stock price to be After the split?

The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share. The company has just announced a 7-for-3 stock split. What will the market price per share be after the Split?

The Peanut Shop has 5,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the ﬁrm is $390,000. The company just announced a 3-for-1 stock split. What will the market price per share be after the split?

JimGyms has the following quarterly earnings projections. The company retains 60% of its earnings and follows a stable dividend policy each year. What is the dividend for the 2nd quarter?

The Mores Clothing Depot maintains a debt-equity ratio of .50 and follows a residual dividend policy. The ﬁrm needs $2,700 for new investments next year. The after-tax earnings this year are $1,700. What is the amount that the Clothing Depot will pay out in dividends for this year?

The board of directors of DDT Inc. has declared a dividend of $0.75 per share payable on Monday, January 28 to shareholders of record as of Monday, January 14. Under TSX rules, if you bought 500 Shares of DDT stock on Friday, January 11 for $7.50 per share, how much will you receive in Dividends?

The Winston Co. has 120,000 shares of stock outstanding. The current market value of the ﬁrm is $4.5 million. The company has retained earnings of $2.1 million. The company is planning a 3-for-1 Stock split. What will the market price per share be after the split?