Mesmer Analytic, a biotechnology firm, floated an initial public offering of 2,000,000 shares at a price of R5.00 per share.The firm's owner/managers held 60 percent of the company's R1.00 par value authorized and issued shares following the public offering.One month after the IPO, the firm's board of directors declared a one-time dividend of R0.50 per share payable to all shareholders, meaning that the owner/managers would receive an immediate dividend, in part out of the pockets of the new public shareholders.What was the book value per share of the firm before and after the special dividend was paid?

Question

Quizplus · Accepted Answer

Before the dividend, the book value per share is calculated as the total equity divided by the total number of shares. After the dividend, the book value per share decreases by the dividend amount per share.

Mesmer Analytic, a Biotechnology Firm, Floated an Initial Public Offering