Dunder Imports has common stock outstanding at a market price of $57 per share.The total market value of the firm is $5,130,000.The firm plans on liquidating one of its divisions for $500,000 in cash, after taxes, and distributing the proceeds to the shareholders in the form of a liquidating dividend.What will be the amount per share of that dividend?

Question

Quizplus · Accepted Answer

The liquidating dividend per share is calculated by dividing the total cash from the liquidation ($500,000) by the number of shares outstanding. The number of shares is the total market value of the firm ($5,130,000) divided by the market price per share ($57), which equals 90,000 shares. Therefore, the dividend per share is $500,000 / 90,000 = $5.556.

Dunder Imports Has Common Stock Outstanding at a Market Price