1.Pearce & Company has 15 million shares of $4 par value common stock outstandin

Question

1.Pearce & Company has 15 million shares of $4 par value common stock outstanding. The company believes that its current market price of $100 per share is too high and decides to execute a 2-for-1 forward stock split to lower the price.

How many shares will be outstanding following the stock split?

What will be the new par value per share?

2.The Arcadia Company has 80,000 shares of cumulative, four percent, $80 par value preferred stock outstanding. Last year the company failed to pay its regular dividend, but the board of directors would like to resume paying its regular dividend this year.

Calculate the dividends in arrears and the total dividend that must be paid this year.
Dividend in arrears ?
Total dividend ?

Explanation / Answer

1 Shares outstanding following the stock split = 15*2 = 30 million New par value per share = $2 2 Dividend in arrears =80000*80*4%= 256000 Total dividend = 256000*2 = 512000

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