The following data apply to Garber Industries, Inc. (GII):

$\begin{array}{l}
\begin{array} { l }
\text {Value of operations}\
\text {Short-term investments}\
\text {Debt}\
\text { Numher of shares }
\end{array}
\begin{array} { l }
\$ 1,000 \
\$ 100 \
\$ 300\
\$ 100
\end{array}
\end{array}$

The company plans on distributing $100 as dividend payments. What will the intrinsic per share stock price be immediately after the distribution?
A) $6.32
B) $6.65
C) $7.00
D) $7.35
E) $7.72

Question

The following data apply to Garber Industries, Inc. (GII):

$\begin{array}{l}
\begin{array} { l } 
\text {Value of operations}\
\text {Short-term investments}\
\text {Debt}\
\text { Numher of shares }
\end{array}
\begin{array} { l } 
\$ 1,000 \
\$ 100 \
\$ 300\
\$ 100
\end{array}
\end{array}$

The company plans on distributing $100 as dividend payments. What will the intrinsic per share stock price be immediately after the distribution?
A) $6.32
B) $6.65
C) $7.00
D) $7.35
E) $7.72

Quizplus · Accepted Answer

$\begin{array}{l}
\begin{array} { l } 
\
\
\text { Value of operations}\
\text { + Value of nonoperating assets }\
\text { Total intrinsic value of firm}\
\text { -Debt }\
\text { Intrinsic value of equity }\
\text {÷ Number of shares }\
\text {  Intrinsic price per share }
\end{array}
\begin{array} { l } 
\text { Prior to }&\text { After }\
\text { Distribution }& \text { Distribution }\
\$ 1,000.00 &\$ 1,000.00\
100.00 &0.00\
\hline \$ 1,100.00&\$ 1,000.00 \
300.00&300.00\
\hline \$ 800.00& \$ 700.00  \
100.00 &100.00 \
\hline \$ 8.00& \$ 7.00
\end{array}
\end{array}$

The Following Data Apply to Garber Industries, Inc The Company Plans on Distributing $100 as Dividend Payments