Global Traders has common stock outstanding at a market price of $53 per share. The total market value of the firm is $6,603,800. The firm plans on liquidating one of its divisions for $548,000 in cash 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

First, we need to calculate the total value of the firm's common stock outstanding, which is:
Total market value of the firm / Market price per share = $6,603,800 / $53 = 124,554 shares.

Next, we need to subtract the cash proceeds from the liquidation of the division from the total market value of the firm, which gives us:
$6,603,800 - $548,000 = $6,055,800.

Finally, we can calculate the liquidating dividend per share by dividing the remaining value by the number of outstanding shares:
Liquidating dividend per share = Remaining value / Number of outstanding shares
= $6,055,800 / 124,554
= $48.65

Therefore, the amount per share of the liquidating dividend will be $48.65, or $4.398 rounded to the nearest hundredth, and the best choice is B.

Global Traders Has Common Stock Outstanding at a Market Price