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7. Ducheyne Electric recently declared a 15 percen...




7. Ducheyne Electric recently declared a 15 percent stock dividend. On the date of the stock dividend Ducheyne had 16 million shares outstanding priced at $46 per share in the market. An accounting entry was required on the balance sheet transferring some retained earnings to the common stock account. If retained earnings was $280 million prior to the transaction, what was the dollar amount of retained earnings after the transfer? (Points : 1) $280.0 million $110.4 million $234.0 million $277.6 million $169.6 million 8. A 2-for-1 stock split (Points : 1) increases the number of shares of stock held by the firm's stoc holders. increases the per share price of the firm's stock. requires stockholders to invest more money in the firm's stock. requires the firm to adjust the value of its total assets on the balance sheet. generally decreases the total value of the firm that splits its stock. 9. Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firm's capital structure consists of 40 percent debt and 60 percent equity, and its marginal tax rate is 40 percent. The cost of equity is 14 percent, and the company pays a 10 percent rate on its $5,000,000 of long-term debt. One million shares of common stock are outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $1,200,000, and it will fund this project in accordance with its target capital structure. If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio? (Points : 1) 100% 60% 40% 20% 0% 10. Makeover Inc. believes that at its current stock price of $16.00 the firm is undervalued in the market. Makeover plans to repurchase 2.4 million of its 20 million shares outstanding. The firm's managers expect that they can repurchase the entire 2.4 million shares at the expected equilibrium price after repurchase. The firm's current earnings are $44 million. If management's assumptions hold, what is the expected market price after repurchase? (Points : 1) $16.00 $17.26 $18.18 $20.00 $24.40


Paper#8504 | Written in 18-Jul-2015

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