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Finance Week 8-Katie Homes and Garden Co. has 13,400,000 shares outstanding....

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Question;1.00 pointKatie Homes and Garden Co. has 13,400,000 shares outstanding. The stock is currently selling at $54 pershare. If an unfriendly outside group acquired 20 percent of the shares, existing stockholders will be able tobuy new shares at 25 percent below the currently existing stock price.a. How many shares must the unfriendly outside group acquire for the poison pill to go into effect? (Do notround intermediate calculations.)Number of sharesb. What will be the new purchase price for the existing stockholders? (Do not round intermediatecalculations. Round your answer to 2 decimal places.)New purchase price$View Hint #1Worksheet2.Difficulty: BasicLearning Objective: 17-04 Poisonpills and other similar provisionsmay make it difficult for outsiders totake over a corporation againstmanagement s wishes.award:1.00 pointMr. Meyers wishes to know how many shares are necessary to elect 5 directors out of 9 directors up forelection in the Austin Power Company. There are 73,000 shares outstanding. (Do not round intermediatecalculations.)Number of sharesView Hint #1Worksheet3.Difficulty: BasicLearning Objective: 17-02Cumulative voting provides minoritystockholders with the potential forsome representation on the board ofdirectors.award:1.00 pointhttp://ezto.mheducation.com/hm.tpxPage 1 of 21Assignment Print View12/5/14, 10:33 PMBetsy Ross owns 921 shares in the Hanson Fabrics Company. There are 16 directors to be elected. Thereare 32,500 shares outstanding. The firm has adopted cumulative voting.a. How many total votes can be cast? (Do not round intermediate calculations and round your answerto the nearest whole number.)Total votesb. How many votes does Betsy control? (Do not round intermediate calculations and round youranswer to the nearest whole number.)Votesc. What percentage of the total votes does she control? (Do not round intermediate calculations. Inputyour answer as a percent rounded to 2 decimal places.)Percentage of votes%View Hint #1Worksheet4.Difficulty: BasicLearning Objective: 17-02Cumulative voting provides minoritystockholders with the potential forsome representation on the board ofdirectors.award:1.00 pointMidland Petroleum is holding a stockholders meeting next month. Ms. Ramsey is the president of thecompany and has the support of the existing board of directors. All 13 members of the board are up forreelection. Mr. Clark is a dissident stockholder. He controls proxies for 32,001 shares. Ms. Ramsey and herfriends on the board control 52,001 shares. Other stockholders, whose loyalties are unknown, will be votingthe remaining 30,998 shares. The company uses cumulative voting.a. How many directors can Mr. Clark be sure of electing? (Do not round intermediate calculations.Round down your answer to the nearest whole number.)Number of directorsb. How many directors can Ms. Ramsey and her friends be sure of electing? (Do not roundintermediate calculations. Round down your answer to the nearest whole number.)Number of directorsc-1. How many directors could Mr. Clark elect if he obtains all the proxies for the uncommitted votes? (Donot round intermediate calculations. Round down your answer to the nearest whole number.)Number of directorshttp://ezto.mheducation.com/hm.tpxPage 2 of 21Assignment Print View12/5/14, 10:33 PMc-2. Will he control the board?YesNod. If nine directors were to be elected, and Ms. Ramsey and her friends had 60,001 shares and Mr. Clarkhad 40,001 shares plus half the uncommitted votes, how many directors could Mr. Clark elect? (Donot round intermediate calculations. Round down your answer to the nearest whole number.)Number of directorsView Hint #1Worksheet5.Difficulty: BasicLearning Objective: 17-02Cumulative voting provides minoritystockholders with the potential forsome representation on the board ofdirectors.award:1.00 pointRust Pipe Co. was established in 1994. Four years later, the company went public. At that time, RobertRust, the original owner, decided to establish two classes of stock. The first represents Class A founders'stock and is entitled to eleven votes per share. The normally traded common stock, designated as Class B,is entitled to one vote per share. In late 2010, Mr. Stone, an investor, was considering purchasing shares inRust Pipe Co. While he knew the existence of founders shares were not often present in other companies,he decided to buy the shares anyway because of a new technology Rust Pipe had developed to improvethe flow of liquids through pipes.Of the 2,450,000 total shares currently outstanding, the original founder's family owns 53,825 shares.What is the percentage of the founder's family votes to Class B votes? (Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimal places.)Percentage of votes%View Hint #1Worksheet6.Difficulty: IntermediateLearning Objective: 17-01 Commonstockholders are the owners of thecorporation and therefore have aclaim to undistributed income, theright to elect the board of directors,and other privileges.award:2.00 pointsMr. and Mrs. Anderson own four shares of Magic Tricks Corporation's common stock. The market value ofthe stock is $80. The Andersons also have $65 in cash. They have just received word of a rights offering.One new share of stock can be purchased at $65 for each four shares currently owned (based on fourrights).http://ezto.mheducation.com/hm.tpxPage 3 of 21Assignment Print View12/5/14, 10:33 PM(Do not round intermediate calculations and round your answers to the nearest whole dollar.)a. What is the value of a right?Value per right$b. What is the value of the Andersons portfolio before the rights offering? (Portfolio in this questionrepresents stock plus cash.)Portfolio value$c-1. Compute the diluted value (ex-rights) per share.Diluted value$c-2. If the Andersons participate in the rights offering, what will be the value of their portfolio, based on thediluted value (ex-rights) of the stock?Portfolio value$d. If they sell their two rights but keep their stock at its diluted value and hold on to their cash, what willbe the value of their portfolio?Portfolio value$View Hint #1Worksheet7.Difficulty: IntermediateLearning Objective: 17-03 A rightsoffering gives current stockholders afirst option to purchase new shares.award:2.00 pointsWalker Machine Tools has 7 million shares of common stock outstanding. The current market price ofWalker common stock is $82 per share rights-on. The companys net income this year is $25.00 million. Arights offering has been announced in which 700,000 new shares will be sold at $76.50 per share. Thesubscription price plus seven rights is needed to buy one of the new shares.a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rightsoffering? (Do not round intermediate calculations and round your answers to 2 decimal places.)Earnings per sharePrice-earnings ratio$b. What would the earnings per share be immediately after the rights offering? What would the priceearnings ratio be immediately after the rights offering? (Assume there is no change in the market valueof the stock, except for the change when the stock begins trading ex-rights.) (Do not roundintermediate calculations and round your answers to 2 decimal places.)http://ezto.mheducation.com/hm.tpxPage 4 of 21Assignment Print View12/5/14, 10:33 PMEarnings per share$Price-earnings ratioView Hint #1Worksheet8.Difficulty: ChallengeLearning Objective: 17-03 A rightsoffering gives current stockholders afirst option to purchase new shares.award:2.00 pointsEnterprise Storage Company has 550,000 shares of cumulative preferred stock outstanding, which has astated dividend of $8.75. It is six years in arrears in its dividend payments. Use Appendix B for anapproximate answer but calculate your final answer using the formula and financial calculator methods.a. How much in total dollars is the company behind in its payments? (Do not round intermediatecalculations. Input your answer in dollars, not millions (e.g., $1,234,000).)Dividend in arrears$b. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit.The common stock will pay the following dividends over the next four years:D1D2D3D4$1.701.801.902.00The company anticipates earnings per share after four years will be $4.20 with a P/E ratio of 15.The common stock will be valued as the present value of future dividends plus the present value of thefuture stock price after four years. The discount rate used by the investment banker is 11 percent.Compute the value of the common stock. (Do not round intermediate calculations and round youranswer to 2 decimal places.)Common stock$c. How many shares of common stock must be issued at the value computed in part b to eliminate thedeficit (arrearage) computed in part a? (Do not round intermediate calculations and round youranswer to the nearest whole share.)Number of shares of common stockView Hint #1Worksheethttp://ezto.mheducation.com/hm.tpxDifficulty: ChallengeLearning Objective: 17-05 Preferredstock is an intermediate type ofsecurity that falls somewherePage 5 of 21Assignment Print View12/5/14, 10:33 PMbetween debt and common stock.9.award:1.00 pointRalston Gourmet Foods Inc. earned $165 million last year and retained $125 million.What is the payout ratio? (Do not round intermediate calculations. Input your answer as a percentrounded to 2 decimal places.)Payout ratio%View Hint #1Worksheet10.Difficulty: BasicLearning Objective: 18-01 Theboard of directors and corporatemanagement must decide what todo with the firm s annual earnings:pay them out in dividends or retainthem for reinvestment in futureprojects.award:1.00 pointPolycom Systems earned $504 million last year and paid out 26 percent of earnings in dividends.a. By how much did the companys retained earnings increase? (Do not round intermediatecalculations. Input your answer in dollars, not millions (e.g., $1,234,000).)Addition to retained earnings$b. With 100 million shares outstanding and a stock price of $143, what was the dividend yield? (Hint: Firstcompute dividends per share.) (Do not round intermediate calculations. Input your answer as apercent rounded to 2 decimal places.)Dividend yield%View Hint #1Worksheet11.Difficulty: BasicLearning Objective: 18-01 Theboard of directors and corporatemanagement must decide what todo with the firm s annual earnings:pay them out in dividends or retainthem for reinvestment in futureprojects.award:1.00 pointhttp://ezto.mheducation.com/hm.tpxPage 6 of 21Assignment Print View12/5/14, 10:33 PMThe following companies have different financial statistics.Growth rate in sales and earningsCash as a percentage of total assetsTurtle Co.9%Hare Corp.17%4a. What dividend policy would you recommend for Turtle Co.?High payout ratioLow payout ratiob. What dividend policy would you recommend for Hare Corp.?Low payout ratioHigh payout ratioView Hint #1Worksheet12.Learning Objective: 18-02 Dividendsmay have a positive or negativeinformation content forshareholders. Dividend policy canalso provide information aboutwhere the firm is on its life cyclecurve.Difficulty: Basicaward:2.00 pointsPlanetary Travel Co. has $215,000,000 in stockholders equity. Common stock is $40,000,000 and thebalance is retained earnings. The firm has $350,000,000 in total assets and 5 percent of this value is incash. Earnings for the year are $25,000,000 and are included in retained earnings.a. What is the legal limit on current dividends? (Do not round intermediate calculations. Input youranswer in dollars, not millions (e.g., $1,234,000).)Legal limit on current dividends$b. What is the practical limit based on liquidity? (Do not round intermediate calculations. Input youranswer in dollars, not millions (e.g., $1,234,000).)Practical limit on current dividends$c. If the company pays out the amount in part b, what is the dividend payout ratio? (Do not roundintermediate calculations. Input your answer as a percent rounded to 2 decimal places.)Payout ratiohttp://ezto.mheducation.com/hm.tpx%Page 7 of 21Assignment Print View12/5/14, 10:33 PMView Hint #1Worksheet13.Difficulty: BasicLearning Objective: 18-03 Manyother factors also influence dividendpolicy, such as legal rules, the cashposition of the firm, and the taxposition of shareholders.award:2.00 pointsA financial analyst is attempting to assess the future dividend policy of Environmental Systems byexamining its life cycle. She anticipates no payout of earnings in the form of cash dividends during thedevelopment stage (I). During the growth stage (II), she anticipates 15 percent of earnings will bedistributed as dividends. As the firm progresses to the expansion stage (III), the payout ratio will go up to 31percent, and eventually reach 55 percent during the maturity stage (IV).a. Assuming earnings per share will be as follows during each of the four stages, indicate the cashdividend per share (if any) during each stage. (Leave no cells blank - be certain to enter "0"wherever required. Do not round intermediate calculations and round your answers to 2 decimalplaces.)Stage IStage IIStage IIIStage IV$.351.602.703.60Stage IStage IIStage IIIStage IV$$$$Dividendsb. Assume in Stage IV that an investor owns 310 shares and is in a 15 percent tax bracket. What will bethe investors aftertax income from the cash dividend? (Do not round intermediate calculations andround your answer to 2 decimal places.)Aftertax income$c. In what two stages is the firm most likely to utilize stock dividends or stock splits? (Select two answers.Single click the box with the question mark to produce a check mark for a correct answer anddouble click the box with the question mark to empty the box for a wrong answer.)Stage IStage IIhttp://ezto.mheducation.com/hm.tpxPage 8 of 21Assignment Print View12/5/14, 10:33 PMStage IIIStage IVView Hint #1Worksheet14.Difficulty: BasicLearning Objective: 18-02 Dividendsmay have a positive or negativeinformation content forshareholders. Dividend policy canalso provide information aboutwhere the firm is on its life cyclecurve.award:2.00 pointsSquash Delight Inc. has the following balance sheet:AssetsCashAccounts receivableFixed assets$Total assets70,000348,000960,000$ 1,378,000LiabilitiesAccounts payable$Notes payableCommon stock (100,000 shares @ $2 par)Capital in excess of parRetained earningsTotal liabilities & owners' equity276,00052,000200,000100,000750,000$ 1,378,000The firms stock sells for $14 a share.a. Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediatecalculations and round your answers to the nearest whole dollar.)Common stockCapital excess of parRetained earnings$$$Total equity$http://ezto.mheducation.com/hm.tpxPage 9 of 21Assignment Print View12/5/14, 10:33 PMb. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. Inpart b do not assume the stock split has taken place. (Do not round intermediate calculations andround your answers to the nearest whole dollar.)Common stockCapital excess of parRetained earnings$$$Total equity$c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on futurecash dividends?Stock splitStock dividendView Hint #1Worksheet15.Difficulty: BasicLearning Objective: 18-04 Stockdividends and stock splits providecommon stockholders with newshares, but their value must becarefully assessed.award:2.00 pointsIn doing a five-year analysis of future dividends, the Dawson Corporation is considering the following twoplans. The values represent dividends per share. Use Appendix B for an approximate answer but calculateyour final answer using the formula and financial calculator methods.Year12345Plan A$ 1.901.901.902.402.40Plan B$.602.30.205.001.60a. How much in total dividends per share will be paid under each plan over five years? (Do not roundintermediate calculations and round your answers to 2 decimal places.)Plan APlan Bhttp://ezto.mheducation.com/hm.tpxTotal Dividends$$Page 10 of 21Assignment Print View12/5/14, 10:33 PMb-1. Mr. Bright, the Vice-President of Finance, suggests that stockholders often prefer a stable dividendpolicy to a highly variable one. He will assume that stockholders apply a lower discount rate todividends that are stable. The discount rate to be used for Plan A is 8 percent, the discount rate forPlan B is 12 percent. Compute the present value of future dividends. (Do not round intermediatecalculations and round your answers to 2 decimal places.)Plan APlan BPresent Value ofFuture Dividends$$b-2. Which plan will provide the higher present value for the future dividends?Plan APlan BView Hint #1Worksheet16.Difficulty: BasicLearning Objective: 18-01 Theboard of directors and corporatemanagement must decide what todo with the firm s annual earnings:pay them out in dividends or retainthem for reinvestment in futureprojects.award:1.00 pointThe stock of Pills Berry Company is currently selling at $95 per share. The firm pays a dividend of $3.10 pershare.a. What is the annual dividend yield? (Do not round intermediate calculations. Input your answer as apercent rounded to 2 decimal places.)Dividend yield%b. If the firm has a payout rate of 25 percent, what is the firms P/E ratio? (Do not round intermediatecalculations and round your answer to 2 decimal places.)P/E ratiotimesView Hint #1Worksheethttp://ezto.mheducation.com/hm.tpxDifficulty: BasicLearning Objective: 18-01 Theboard of directors and corporatemanagement must decide what todo with the firm s annual earnings:pay them out in dividends or retainPage 11 of 21Assignment Print View12/5/14, 10:33 PMthem for reinvestment in futureprojects.17.award:1.00 pointThe shares of the Dyer Drilling Co. sell for $60. The firm has a P/E ratio of 15. Twenty percent of earnings ispaid out in dividends.What is the firms dividend yield? (Do not round your intermediate calculations. Input your answer as apercent rounded to 2 decimal places.)Dividend yield%View Hint #1Worksheet18.Difficulty: BasicLearning Objective: 18-01 Theboard of directors and corporatemanagement must decide what todo with the firm s annual earnings:pay them out in dividends or retainthem for reinvestment in futureprojects.award:2.00 pointsThe Western Pipe Company has the following capital section in its balance sheet. Its stock is currentlyselling for $5 per share.Common stock (45,000 shares at $1 par)Capital in excess of parRetained earnings$45,00045,000110,000Total equity$200,000The firm intends to first declare a 15 percent stock dividend and then pay a 20-cent cash dividend (whichalso causes a reduction of retained earnings).Show the capital section of the balance sheet after the first transaction and then after the secondtransaction. (Do not round intermediate calculations and round your answers to the nearest wholedollar.)Western Pipe Co.After Stock DividendCommon stock$Capital in excess of parRetained earningshttp://ezto.mheducation.com/hm.tpxPage 12 of 21Assignment Print View12/5/14, 10:33 PMTotal equity$Western Pipe Co.After Cash DividendCommon stockCapital in excess of parRetained earnings$Total equity$View Hint #1Worksheet19.Difficulty: IntermediateLearning Objective: 18-04 Stockdividends and stock splits providecommon stockholders with newshares, but their value must becarefully assessed.award:3.00 pointsPhillips Rock and Mud is trying to determine the maximum amount of cash dividends it can pay this year.Assume its balance sheet is as follows:AssetsCashAccounts receivableFixed assets$ 389,000890,000996,000Total assets$2,275,000Liabilities and Stockholders' EquityAccounts payable$Long term payableCommon stock (290,000 shares at $2 par)Retained earningsTotal liabilities and stockholders' equity505,000335,000580,000855,000$2,275,000a-1. From a legal perspective, what is the maximum amount of dividends per share the firm could pay? (Donot round intermediate calculations and round your answer to 2 decimal places.)Dividends per share$a-2. Is this realistic?http://ezto.mheducation.com/hm.tpxPage 13 of 21Assignment Print View12/5/14, 10:33 PMYesNob. In terms of cash availability, what is the maximum amount of dividends per share the firm could pay?(Do not round intermediate calculations and round your answer to 2 decimal places.)Dividends per share$c. Assume the firm earned an 12 percent return on stockholders equity last year. If the board wishes topay out 60 percent of earnings in the form of dividends, how much will dividends per share be? (Donot round intermediate calculations and round your answer to 2 decimal places.)Dividends per share$View Hint #1Worksheet20.Difficulty: IntermediateLearning Objective: 18-01 Theboard of directors and corporatemanagement must decide what todo with the firm s annual earnings:pay them out in dividends or retainthem for reinvestment in futureprojects.award:2.00 pointsOmni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds toincrease its future growth rate.P0 =D1Ke gP0 = Price of the stock todayD1 = Dividend at the end of the first yearD1 = D0 (1 + g)D0 = Dividend todayKe = Required rate of returng = Constant growth rate in dividendsD0 is currently $2.40, Ke is 13 percent, and g is 5 percent.Under Plan A, D0 would be immediately increased to $3.00 and Ke and g will remain unchanged.Under Plan B, D0 will remain at $2.40 but g will go up to 6 percent and Ke will remain unchanged.a. Compute P0 (price of the stock today) under Plan A. Note D1 will be equal to D0 (1 + g) or $3.00(1.05). Ke will equal 13 percent, and g will equal 5 percent. (Round your intermediate calculationsand final answer to 2 decimal places.)http://ezto.mheducation.com/hm.tpxPage 14 of 21Assignment Print View12/5/14, 10:33 PMStock price for Plan A$b. Compute P0 (price of the stock today) under Plan B. Note D1 will be equal to D0 (1 + g) or $2.40(1.06). Ke will be equal to 13 percent, and g will be equal to 6 percent. (Round your intermediatecalculations and final answer to 2 decimal places.)Stock price for Plan B$c. Which plan will produce the higher value?Plan BPlan AView Hint #1Worksheet21.Difficulty: ChallengeLearning Objective: 18-02 Dividendsmay have a positive or negativeinformation content forshareholders. Dividend policy canalso provide information aboutwhere the firm is on its life cyclecurve.award:3.00 pointsWilson Pharmaceuticals stock has done very well in the market during the last three years. It has risen from$75 to $100 per share. The firms current statement of stockholders equity is as follows:Common stock (2 million shares issuedat par value of $10 per share)Paid-in capital in excess of parRetained earnings$ 20,000,00019,000,00046,000,000Net worth$ 85,000,000a-1. How many shares would be outstanding after a two-for-one stock split? (Do not round intermediatecalculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").)Number of sharesmilliona-2. What would be its par value? (Do not round intermediate calculations and round your answer to2 decimal places.)Par value$b-1. How many shares would be outstanding after a three-for-one stock split? (Do not round intermediatecalculations. Input your answer in millions (e.g., $1.23 million should be entered as "1.23").)Number of shareshttp://ezto.mheducation.com/hm.tpxmillionPage 15 of 21Assignment Print View12/5/14, 10:33 PMb-2 What would be its par value? (Do not round intermediate calculations and round your answer to2 decimal places.)Par value$c. Assume that Wilson earned $18 million. What would its earnings per share be before and after thetwo-for-one stock split? After the three-for-one stock split? (Do not round intermediate calculationsand round your answers to 2 decimal places.)EPS beforeEPS after 2-for-1 splitEPS after 3-for-1 split$$$d. What would be the price per share after the two-for-one stock split? After the three-for-one stock split?(Assume that the price-earnings ratio of 11.11 stays the same.) (Do not round intermediatecalculations and round your answers to 2 decimal places.)Price after 2-for-1 splitPrice after 3-for-1 split$$View Hint #1Worksheet22.Difficulty: ChallengeLearning Objective: 18-04 Stockdividends and stock splits providecommon stockholders with newshares, but their value must becarefully assessed.award:3.00 pointsAce Products sells marked playing cards to blackjack dealers. It has not paid a dividend in many years, butis currently contemplating some kind of dividend.The capital accounts for the firm are as follows:Common stock (2,500,000 shares at $5 par)Capital in excess of par*Retained earningsNet worth$ 12,500,0005,000,00022,500,000$ 40,000,000*The increase in capital in excess of par as a result of a stock dividend is equal to the new shares createdtimes (Market price Par value).The companys stock is selling for $20 per share. The company had total earnings of $5,000,000 during theyear. With 2,500,000 shares outstanding, earnings per share were $2. The firm has a P/E ratio of 10.a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Showhttp://ezto.mheducation.com/hm.tpxPage 16 of 21Assignment Print View12/5/14, 10:33 PMthe new capital accounts. (Do not round intermediate calculations. Input your answers in dollars,not millions (e.g. $1,230,000).)Common stockCapital in excess of parRetained earnings$Net worth$b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.)(Do not round intermediate calculations and round your answers to 2 decimal places.)EPSStock price$$c. How many shares would an investor end up with if he or she originally had 150 shares? (Do not roundintermediate calculations and round your answer to the nearest whole share.)Number of sharesd. What is the investor's total investment worth before and after the stock dividend if the P/E ratio remainsconstant? (Do not round intermediate calculations and round your answers to the nearest wholedollar.)Before stock dividendAfter stock dividendTotal Investment$$View Hint #1Worksheet23.Difficulty: ChallengeLearning Objective: 18-04 Stockdividends and stock splits providecommon stockholders with newshares, but their value must becarefully assessed.award:5.00 pointsHealth Systems Inc. is considering a 20 percent stock dividend. The capital accounts are as follows:Common stock (5,000,000 shares at $10 par)Capital in excess of par*Retained earningsNet worthhttp://ezto.mheducation.com/hm.tpx$ 50,000,00025,000,00065,000,000$140,000,000Page 17 of 21Assignment Print View12/5/14, 10:33 PM*The increase in capital in excess of par as a result of a stock dividend is equal to the shares created times(Market price Par value).The companys stock is selling for $35 per share. The company had total earnings of $12,500,000 with5,000,000 shares outstanding and earnings per share were $2.50. The firm has a P/E ratio of 14.a. What adjustments would have to be made to the capital accounts for a 20 percent stock dividend? Showthe new capital accounts. (Do not round intermediate calculations. Input your answers in dollars,not millions (e.g. $1,230,000).)Common stockCapital in excess of parRetained earnings$Net worth$b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.)(Do not round intermediate calculations and round your answers to 2 decimal places.)EPSStock price$$c. How many shares would an investor have if he or she originally had 120? (Do not round intermediatecalculations and round your answer to the nearest whole share.)Number of sharesd. What is the investors total investment worth before and after the stock dividend if the P/E ratio remainsconstant? (Do not round intermediate calculations and round your answers to the nearest wholedollar.)Total Investment$$Before stock dividendAfter stock dividende. Assume Mr. Heart, the president of Health Systems, wishes to benefit stockholders by keeping the cashdividend at a previous level of $1.15 in spite of the fact that the stockholders how have 20 percent moreshares. Because the cash dividend is not reduced, the stock price is assumed to remain at $35.What is an investors total investment worth after the stock dividend if he/she had 120 shares before thestock dividend?Total investment$f. Under the scenario described in part e, is the investor better off?Yeshttp://ezto.mheducation.com/hm.tpxPage 18 of 21Assignment Print View12/5/14, 10:33 PMNog. As a final question, what is the dividend yield on this stock under the scenario described in part e?(Input your answer as a percent rounded to 2 decimal places.)Dividend yield%View Hint #1Worksheet24.Difficulty: ChallengeLearning Objective: 18-04 Stockdividends and stock splits providecommon stockholders with newshares, but their value must becarefully assessed.award:3.00 pointsWorst Buy Company has had a lot of complaints from customers of late, and its stock price is now only $4per share. It is going to employ a one-for-six reverse stock split to increase the stock value. Assume DeanSmith owns 108 shares.a. How many shares will he own after the reverse stock split? (Do not round intermediate calculationsand round your answer to the nearest whole number.)Number of sharesb. What is the anticipated price of the stock after the reverse stock split? (Do not round intermediatecalculations and round your answer to 2 decimal places.)Anticipated stock price$c. Because investors often have a negative reaction to a revere stock split, assume the stock only goes upto 90 percent of the value computed in part b. What will the stocks price be? (Do not roundintermediate calculations and round your answer to 2 decimal places.)Stock price$d. How has the total value of Dean Smiths holdings changed from before the reverse stock split to after thereverse stock split (based on the stock value computed in part c)? To get the total value before and afterthe split, multiply the shares held times the stock price.(Input the amount as a positive value. Do notround intermediate calculations and round your answer to 2 decimal places.)Dean Smiths holdings(Click to select)$View Hint #1Worksheethttp://ezto.mheducation.com/hm.tpxDifficulty: ChallengeLearning Objective: 18-04 Stockdividends and stock splits providecommon stockholders with newshares, but their value must becarefully assessed.Page 19 of 21Assignment Print View25.12/5/14, 10:33 PMaward:4.00 pointsThe Carlton Corporation has $4 million in earnings after taxes and 1 million shares outstanding. The stocktrades at a P/E of 10. The firm has $1 million in excess cash.a. Compute the current price of the stock. (Do not round intermediate calculations and round youranswer to 2 decimal places.)Current price$b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not roundintermediate calculations and round your answer to 2 decimal places.)Dividends per share$c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how manyshares will be acquired? (Do not round intermediate calculations and round your answer to thenearest whole share.)Number of shares acquiredsharesd. What will the new earnings per share be? (Use the rounded number of shares computed in part cbut do not round any other intermediate calculations. Round your answer to 2 decimal places.)Earnings per share$e-1. If the P/E ratio remains constant, what will the price of the securities be? (Use the rounded answerfrom part d and round your answer to the nearest whole dollar.)Stock price$e-2. By how much, in terms of dollars, did the repurchase increase the stock price? (Use the roundedwhole dollar answer from part e-1. A negative value should be indicated with a minus sign.Round your answer to the nearest whole dollar.)Stock price increase / decrease$f. Has the stockholders' total wealth changed as a result of the stock repurchase as opposed toreceiving the cash dividend?YesNoView Hint #1Worksheet26.Difficulty: ChallengeLearning Objective: 18-05 Somefirms make a decision to repurchasetheir shares in the market ratherthan increase dividends.award:4.00 pointshttp://ezto.mheducation.com/hm.tpxPage 20 of 21Assignment Print View12/5/14, 10:33 PMThe Hastings Sugar Corporation has the following pattern of net income each year, and associated capitalexpenditure projects. The firm can earn a higher return on the projects than the stockholders could earn ifthe funds were paid out in the form of dividends.Year12345Net Income$12 million15 million11 million15 million15 millionProfitable CapitalExpenditure$ 7 million12 million7 million7 million8 millionThe Hastings Corporation has 2 million shares outstanding (The following questions are separate from eachother).a. If the marginal princi

 

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