A firm has $400 million of assets that includes $40 million of cash and 12 million shares outstanding. The firm uses $40 million of its cash to pay dividends. If an investor has 1000 shares, how many shares must she sell to create a homemade dividend of $4,900?
A) 52.22 shares
B) 41.78 shares
C) 62.67 shares
D) 73.11shares

Question

Quizplus · Accepted Answer

A) Dividend payment = number of shares times dividend per share
Shares sold = (amount needed - dividend payment) / (new price per share)
Old share price = $400 million / 12 million = $33.33;
Dividend payment = $40 million / 12 million = $3.33
New share price = $33.33 - $3.33 = $30.00 11ea84dc_f4fc_a161_9a63_91e20b88bf17_TB1316_00_TB1316_00

A Firm Has $400 Million of Assets That Includes $40