Harmerlin Enterprises has common stock outstanding at a market price of $72 per share.The total market value of the firm is $9,000,000.The firm plans on liquidating one of its divisions for $900,000 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?
A)$7.441
B)$7.200
C)$6.864
D)$6.952
E)$7.026

Question

Quizplus · Accepted Answer

The liquidating dividend per share is calculated by dividing the total cash from the liquidation ($900,000) by the number of shares outstanding. The number of shares is the total market value of the firm ($9,000,000) divided by the market price per share ($72), which equals 125,000 shares. Thus, the dividend per share is $900,000 / 125,000 = $7.20.

Harmerlin Enterprises Has Common Stock Outstanding at a Market Price